A SIGHT ON THE DEVELOPMENT OF THE COMMON LAW_INTEREST OF JUSTICE TAKEN INTO ACCOUNT: Financial Sector Conduct Authority v Financial Services Tribunal and Others (2025 (6) SA 591 (GP)

I have been obessed with the stills of the Close on Sunday Music video. Every frame is pretty and i regard the music video as one of the greatest music video of all time. Hype williams can chill. Anyway, i have always seen S39(2) of the Constitution being cited- The courts when developing the common law has to do while aligning with the spirit, purport and object of the Bill of Right. This is the first time where i read a judgment wherein the court is sought to develop the common law in line section 39 of the Constitution. This some shit i would like to learn how to do, spoting that a particular matter requires one to request the court to exercise its inherent powers and develop law.

Anyway, i have been learning law through doing the FILAC exploration of judgments and here is another one on the judgement of Financial Sector Conduct Authority & Financial Services Tribunal. Those better experienced and knowledgable in the legal-finance related matters will better understand this judgment and will appreciate it more than i did because if service can be effect by email for the purposes of the Finance Sector Regulation act, then thats a good start to that expanding to normal civil litigation in terms of the court rules.

Facts

The application originated from a review of a decision made by the Financial Services Tribunal (the Tribunal).

1. Parties and Roles: The applicant was the Financial Sector Conduct Authority (FSCA), the statutory regulator responsible for financial sector conduct. The fifth respondent was Viceroy Research Partnership LLC (Viceroy), a corporation based in the United States of America. The sixth through eighth respondents were individual foreign residents (a peregrinus in England, France, and Australia, respectively) who acted as Viceroy's partners.

2. Conduct and Penalty: On 30 January 2018, Viceroy and the individual respondents widely distributed a document in South Africa titled "Capitec: A wolf in sheep's clothing". This misinformation caused the share price of the financial institution, Capitec, to drop by over 20%, erasing more than R25 billion in market capitalization. The FSCA investigated and found that the conduct violated section 81 of the Financial Markets Act (FMA) (false, misleading, or deceptive statements). The FSCA imposed an administrative penalty of R50 million on the respondents under section 167 of the Financial Sector Regulation Act (the Act).

3. Tribunal Decision: The respondents applied to the Tribunal for reconsideration. The Tribunal ultimately set aside the penalty against the individual foreign residents (the peregrini) on the ground that, while the FSCA had jurisdiction over their conduct, it did not have jurisdiction over their persons.

   
   

Issues for the Court to Determine

The FSCA applied to the High Court to review and set aside the Tribunal’s finding regarding jurisdiction over the persons of the sixth through eighth respondents. The primary issues before the High Court were:

1. Whether the common-law requirements for establishing jurisdiction over a peregrinus (foreign defendant) applied to the FSCA when imposing an administrative penalty.

2. In the event that common law applied, whether the respondents had implicitly consented to the FSCA's jurisdiction.

3. Alternatively, whether the common law should be developed to eliminate the requirement for personal service in South Africa or to expand the definition of service to include electronic means, thereby establishing jurisdiction over the peregrini.

   
   

Legal Rules and Principles Applicable

The court considered core principles of jurisdiction and constitutional development:

• Jurisdiction in Monetary Claims: Because the administrative penalty, once filed, has the effect of a civil judgment in a superior court, the FSCA was obliged to satisfy the substantive common-law requirements for personal jurisdiction.

• Requirements for Peregrini: Historically, jurisdiction over a peregrinus in a money claim required the arrest of the person or attachment of property. This common law was previously developed in Bid Industrial Holdings (Pty) Ltd v Strang and Another to abolish the requirement for arrest. The remaining requirement for finding jurisdiction was that the summons must be served on the defendant while in South Africa and there must be a sufficient connection to the court's area.

• Constitutional Development: The court possesses the inherent power to develop the common law, taking into account the interests of justice, as mandated by section 173 of the Constitution. Such development must be consistent with advancing the spirit, purport, and objects of the Bill of Rights (Section 39(2)).

  
  

Court’s Application of the Legal Rules and Principles to the Facts

The High Court first addressed the FSCA's main arguments:

1. Application of Common Law: The court found that the Tribunal was correct in concluding that common-law jurisdictional requirements applied because the administrative penalty transforms into a civil judgment upon filing, enforceable by a superior court.

2. Consent to Jurisdiction: The court dismissed the FSCA's claim that the respondents consented to jurisdiction, noting that the respondents consistently reserved all their rights, including the right to raise the jurisdiction point, and were required to challenge the decision at the Tribunal because the penalty already had the effect of a superior court judgment.

3. Service Requirement: The court acknowledged that the procedural steps taken by the FSCA (providing notice of intention) constituted a "summons" for the purpose of the Act, and since the respondents were never physically served while in South Africa, the traditional common-law requirement to establish jurisdiction was not met.

The court then turned to the critical question of common law development:

• Necessity for Change: The court found that insistence on physical service for peregrini in regulatory matters makes little practical sense and actively hampers the effective regulation of digital and extraterritorial financial activity.

• Interests of Justice: The facts demonstrated a massive negative impact on a South African financial institution, wiping out billions in market capitalization. The court determined that to absolve the respondents from liability simply because they were not physically present in South Africa was not in the interest of justice.

• Balancing of Interests: The court held that the importance of regulating financial markets and ensuring stable governance far outweighs the requirement of personal service in this context, justifying the development of the common law.

  
  

Court Conclusion, Order, and Reason for Judgment

Conclusion and Reason for Judgment: The High Court concluded that it was in the interest of justice (relying on its power under section 173 of the Constitution) to develop the common law concerning jurisdiction over peregrini in financial regulatory matters. This development was deemed necessary to address modern exigencies, particularly the global and digital nature of financial market activity, thereby ensuring effective regulation.

Order: The court upheld the FSCA's alternative claim and made the following order:

1. Declaration: It was declared that the FSCA may impose an administrative penalty on a peregrinus where:

   • The requirements of section 167 of the Financial Sector Regulation Act are satisfied.

   • The FSCA had jurisdiction over the person of the peregrinus on the basis that notice of the intention to impose an administrative penalty was delivered to the peregrinus by any means (including electronic means).

   • The connection between the conduct of the peregrinus and South Africa is sufficiently close to make it appropriate and convenient for the regulatory power to be exercised.

2. The majority decision of the Tribunal was set aside.

3. The matter was remitted to the Tribunal to make a decision on the merits of the application for reconsideration.

4. The applicant (FSCA) was ordered to pay the costs of the fifth to eighth respondents.

   
   

Future Implication and Its Impacts on the Lived Realities of People

The judgment has profound implications, particularly for digital accountability and investor protection:

• Digital Accountability and Jurisdiction: This ruling modernizes the law of jurisdiction, moving away from archaic reliance on physical location toward recognizing digital presence as sufficient for enforcing financial penalties. The ruling ensures that foreign actors cannot evade liability for market manipulation or misleading statements simply by remaining offshore and using digital communication. This directly reinforces the legal framework aimed at improving the efficiency, fairness, and transparency of financial markets.

• Protection of Public Interest and Assets: The judgment strengthens the hand of the FSCA in its mandate to regulate the financial conduct that affects the public interest, including promoting market integrity and preventing market abuse. By enabling the imposition of significant administrative fines (R50 million in this case), the judgment indirectly safeguards the economic welfare of the nation and the stability of its financial institutions, which benefits ordinary citizens, investors, and employees.

• Constitutional Mandate Fulfilled: The decision exemplifies the use of the constitutional mandate (Section 173) to develop common law in response to modern commercial and technological realities, preventing the legal system from being frustrated by obsolete procedural rules. This upholds the rule of law by ensuring that regulatory bodies can effectively address transnational harm.

  
  

The analogy for this development is fitting: previously, legal accountability for financial crimes required physically tagging the perpetrator on domestic soil, like needing to touch a foreign ship in port before prosecuting piracy. Now, the law recognizes that if a foreign entity deliberately fires a digital financial torpedo into the market, jurisdiction attaches where the damage is sustained, allowing authorities to pursue them regardless of their physical distance.

DISCLAIMER: THIS DOES NOT CONSTITUTE LEGAL ADVISE NOR ACT AS LEGAL AUTHORITY FOR THE SUBJECT DISCUSSED. THIS IS BASED ON AN IDEA, A CURIOSITY AND DOOM SCROLLING ON SAFLII. CONSULT YOUR ATTORNEY, PREFERABLY LOCAL ATTORNEY AND TAKE IT FROM THERE