Blog: Financial Services Tribunal sets aside R50m fine against short-seller Viceroy – News24

In January 2018, Viceroy published a report titled 'Capitec, a Wolf in Sheep's Clothing'.

In January 2018, Viceroy published a report titled ‘Capitec, a Wolf in Sheep’s Clothing’.

Jacques Stander, Gallo Images


The Financial Services Tribunal has set aside a R50 million fine levied against short-seller Viceroy Research and its partners for its report on Capitec, after concluding the financial regulator didn’t have jurisdiction to impose it.

In 2021, the Financial Sector Conduct Authority (FSCA) fined Viceroy and its partners, Aiden Lau, Fraser John Perring and Gabriel Bernarde for “false” claims made in a 2018 report, which prompted SA’s then fourth-most valuable bank’s shares to crash almost a quarter, wiping out almost R10 billion in value.

A majority of members concluded in the 15 November judgment that given that the Financial Sector Regulation Act did not deal with jurisdiction, the question turned to whether a superior court, such as the Supreme Court of Appeal (SCA), would under common law have such jurisdiction.

“The common law has been restated by the SCA, and this tribunal is bound by that restatement. According to the SCA, a superior court would not have had jurisdiction in a civil case against the applicants. It therefore ought to follow that the Authority did not have jurisdiction to impose a penalty on the applicants,” the judgment read.

In January 2018, Viceroy published a report titled Capitec, a Wolf in Sheep’s Clothing. It said its research showed that Capitec was “a loan shark” that massively understated its bad debts and went as far as recommending that SA Reserve Bank should immediately place the bank into curatorship.

The FSCA had concluded that Viceroy made a number of statements that they ought reasonably to have known were false, misleading or deceptive, including that Capitec would lose a court case that would trigger a class action lawsuit, and it would then be compelled to pay R12.7 billion to its former and current clients.

According to the judgment, Viceroy had an agreement with a hedge fund, Oasis, which made an estimated profit of R82 million amid the panic selling. The share of Viceroy in the profit from short positions taken by Oasis on Capitec was estimated by the authority to be close to $744 482 (R10 million at the time), shared equally among the partners. Viceroy and its partners chose not to disclose the actual amounts, the judgment read.

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