FSCA with egg on its face as OVEX gets the green light

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South Africa’s financial markets watchdog, the Financial Services Conduct Authority (“FSCA“) has made a rather embarrassing account of themselves in the last 24 hours. Yesterday morning, a statement was issued that cryptocurrency trading platform OVEX was improperly conducting business without necessary authorisation. Within a matter of hours, the statement was retracted. CEO of OVEX, Jon Ovadia, was part of last night’s programme to clear the air. Just as businesses and individuals get fined by the market watchdog for improper conduct, such as insider trading or collusion, the FSCA should be looking at itself in this case. It’s caused unnecessary legacy issues for OVEX and made investors skittish. – Justin Rowe-Roberts

Jon Ovadia on the allegations made by the FSCA:

They said that OVEX is operating unlawfully and suspect we are in contravention of the phase act. They said quite a lot of nasty things that weren’t picked up by quite a lot of the press. I obviously woke up with quite a shock. Yesterday the FSCA contacted me with regards to one of our products, the arbitrage service. They had a bunch of questions of which we had until the 12th of May to reply. So I wasn’t too concerned at all, our compliance officer was preparing the response. This morning I wake up to have all our advertising halted, articles going out that we are in contravention of the phase act and all of this. I immediately contacted the FSCA about this and by the sounds of it, a very young intern was basically acting on there own accord and completely out of line.

On operating within an unregulated space: 

We are not operating within a regulated space, however, we don’t have a problem with that. We wish that is was a regulated space to avoid nasty surprises like this coming out of nowhere. Unfortunately it’s not possible at the moment to be regulated. We are in the process of acquiring an FSB license to do forex, due to the nature of our business.

On the arbitrage strategy sounding ‘too good to be true’: 

It definitely does sound too good to be true. There is one caveat that doesn’t make it sound too good to be true and that’s the fact that it’s limited. So you limited to do your foreign investment allowance, which is R10m and your regular allowance, which is R1m, cumulative trading per year. So you can make 2%-4% per trade per day, completely risk-free. Well, you do have a risk, which is the counter-parties, the fact you use an exchange and the exchange might get hacked and all those issues. But otherwise it is completely risk-free.

FSCA Press Release – Update on OVEX (PTY) LTD

The Financial Sector Conduct Authority (FSCA) previously cautioned the public about conducting business with OVEX (PTY) LTD (Registration number: 2018/218598/07) (Ovex), who is not authorised to give any financial advice or render any intermediary services in terms of the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act).

The FSCA now reports that Ovex is in correspondence with the FSCA because it believes that its business model does not require it to obtain a financial services provider licence, as it does not conduct financial services. The FSCA is currently investigating these matters and therefore withdraws the previous media release until such time as the investigation is completed. The FSCA will in due course update the public on the outcome of the investigation.

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