What JP Markets probe revealed

CONFLICT: FIRM ACCUSED OF TRADING AGAINST CLIENTS

An investigation into JP Markets has revealed how the South African-based online forex broker has apparently been operating in “absolute conflict” with its clients – trading against them and meddling with the trading conditions in a bid to drive down high earners’ profitability and hike up the firm’s.

This according to papers filed by the Financial Sector Conduct Authority (FSCA) in the High Court in Johannesburg on Tuesday.

The FSCA suspended JP Markets’ financial services provider (FSP) license in June and is now moving to liquidate the company.

In the papers, Kedibone Dikokwe – who heads up the business supervision division at the FSCA – said while the company’s core business model involved operating under an FSP licence, it had “structured its dealings that it trades with or against its clients”.

“For every loss that a client makes on a transaction, JP Markets makes an equal and corresponding profit.”

The investigation into JP Markets came in response to a barrage of complaints from clients.

But during the course of investigations, a different picture of the company’s operations emerged.

“JP Markets offered their clients access to a platform to trade in CFDs (contracts for difference). Clients opened accounts and deposited funds into one of the bank accounts in the name of and under the full control of JP Markets. A deposit would then permit the client to trade in forex exchange CFDs to the extent of the deposited funds,” she said.

“However, the clients were not trading on an online decentralised global financial market; they were merely entering trades on a platform that was no more than an off-the-shelf software application that recorded these trades.”

The urgent application is expected to be heard later this month. JP Markets did not respond to a request for comment yesterday.