WILL FOREX CAR­TEL ES­CAPE?

CityPress - - Business - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

The ju­ris­dic­tion of South Africa’s com­pe­ti­tion au­thor­i­ties is be­ing ques­tioned by some of the banks im­pli­cated in an al­leged for­eign ex­change car­tel.

The Com­pe­ti­tion Com­mis­sion this week filed ad­di­tional pa­pers to the Com­pe­ti­tion Tri­bunal, mak­ing its ar­gu­ment for why banks with no pres­ence in South Africa can be pros­e­cuted lo­cally.

This is­sue will most likely be the first thing ar­gued be­fore the tri­bunal later this year, po­ten­tially let­ting more than half the banks im­pli­cated in the al­leged cur­rency trad­ing car­tel off the hook.

Some of the banks raised the is­sue at a pre­hear­ing at the tri­bunal on March 10.

The ju­ris­dic­tion ar­gu­ment splits the banks into two groups – the eight that ac­tu­ally have of­fices in South Africa and are reg­is­tered as au­tho­rised deal­ers by the finance min­is­ter, and the 10 that are wholly for­eign, but trade the rand from New York and Lon­don.

In the new af­fi­davit, the com­mis­sion’s in­spec­tor Mfundo Ngob­ese said that the first group con­ducted their al­leged col­lu­sion from within South Africa.

The rest may not have done any­thing in South Africa, but “their con­duct had an ef­fect within the coun­try in that they ma­nip­u­lated the value of the rand”.

Sipho Ng­wema, spokesper­son for the com­mis­sion, said: “The com­mis­sion has made its case for ju­ris­dic­tion. The ball is now in the banks’ court.”

Even if the col­lu­sion did not in­volve any South African clients, the com­mis­sion still be­lieves it has ju­ris­dic­tion.

Ng­wema told City Press that there were prece­dents where for­eign com­pa­nies had been pros­e­cuted by lo­cal com­pe­ti­tion au­thor­i­ties.

“The test is not that a firm is in South Africa, but whether the con­duct of the firm has an ef­fect in South Africa. It doesn’t mat­ter whether the ef­fect is pos­i­tive or neg­a­tive,” he said.

“As long as it in­volves the cur­rency of the Repub­lic of South Africa, [we have ju­ris­dic­tion].

“If they dis­pute it, they should in­di­cate their ba­sis for such a dis­pute. If nec­es­sary, both the com­mis­sion and the banks may have to pro­duce ev­i­dence to sup­port their re­spec­tive po­si­tions,” Ng­wema said.

In Fe­bru­ary, Com­pe­ti­tion Com­mis­sioner Tem­binkosi Bon­akele said in Par­lia­ment that it would re­quire a “far more de­tailed study” to es­tab­lish how the col­lu­sion be­tween cur­rency traders af­fected South Africans.

Legally speak­ing, the ef­fect does not need to be quan­ti­fied to find banks guilty of col­lu­sion.

This rea­son­ing around ju­ris­dic­tion will most likely also be­come key to what­ever fines, if any, ul­ti­mately get levied.

The Com­pe­ti­tion Act al­lows fines of up to 10% of rev­enue made in South Africa.

The re­cent set­tle­ment fine agreed to by Citibank in the cur­rency case amounted to 4% of its South African rev­enue in 2015 (about R70 mil­lion), but not rev­enue specif­i­cally linked to its cur­rency trad­ing op­er­a­tion.

The wholly for­eign banks chal­leng­ing the ju­ris­dic­tion of the tri­bunal could ar­gue that they had no rev­enue in South Africa.

Asked on which rev­enue ba­sis the com­mis­sion would try to get fines im­posed, Ng­wema said that “this will be on a case-by­case ba­sis”.

“In the main, the rev­enue gen­er­ated from trad­ing with the rand will be the start­ing point,” he said.

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