<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: The Financial Sector Conduct Authority [FSCA] has this week alone provisionally withdrawn five FSP [financial services provider] licences \u2013 which were previously approved licences \u2013 for various reasons.<\/p>\n
I must confess, as my part in this, I apologise to the ISFM [International Society for Financial Management] community for not keeping our Warning Wednesdays as diligently as I promised. These are the segments that we do for the show to keep our consumers aware and informed of what is happening in the world so that they can stay safe.<\/p>\n
Nevertheless, we are still going to always have these features and these conversations, and just because it\u2019s Thursday doesn\u2019t mean we\u2019re not going to have them sometime during the week.<\/p>\n
So today, Warning Wednesday has become Warning Thursday.<\/p>\n
And, as usual for these conversations, I\u2019m joined by the divisional executive for enforcement at the Financial Sector Conduct Authority, Gerhard van Deventer, to look at the latest rounds of warnings and releases, and see what we make of them.<\/p>\n
Oom, lovely having you on our show as always. Thanks so much for taking the time. It has been quite some time since you and I last spoke, but clearly the team has been busy.<\/p>\n
GERHARD VAN DEVENTER: Yes, Jimmy, indeed. And I\u2019m very happy that it\u2019s Thursday and not Wednesday and it\u2019s closer to the weekend. The team has been busy.<\/p>\n
But what you also see here is what we\u2019ve promised for a long time \u2013 and that is a refocusing on regulated entities going off the rails, regulated entities creating risk for their client.<\/p>\n
Read: FSCA pulls the plug on several CFD platforms after complaints<\/p>\n
And that\u2019s why you see this specific batch.<\/p>\n
We\u2019re really here looking at a situation \u2013 and I\u2019m talking generally now because it\u2019s five different cases \u2013 we are really looking at material misconduct.<\/p>\n
You\u2019re looking at things like unauthorised use of clients\u2019 funds and you\u2019re looking at false information to the clients and those types of things.<\/p>\n
So these are not administrative oversights. In our view these are very serious and our job is to protect the public.<\/p>\n
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So, notwithstanding the fact that in many of these instances our investigations have not been completed yet, we have reached a point in the investigation where we say we now have enough evidence or information, and we have a duty to provisionally withdraw the licences and let the public know what\u2019s going on.<\/p>\n
JIMMY MOYAHA: Oom, can we take a look at the implications of provisionally withdrawing an FSP licence, because a licence that has been approved that is now provisionally withdrawn would be for a business that already has clients that might be conducting business.<\/p>\n
What does a \u2018provisional withdrawal\u2019 mean for those ongoing operations of that business and for the clients who might have funds with those service providers?<\/p>\n
GERHARD VAN DEVENTER: Thank you. That\u2019s a very important question, Jimmy. I appreciate you putting that on the table.<\/p>\n
So the first, I think, important point that I must make is that it is a provisional withdrawal. It is not a final withdrawal yet.<\/p>\n
So as the law dictates, we now provide them with an opportunity to make submissions and reply to us to say why it should not be finally withdrawn.<\/p>\n
The fact that it\u2019s an ongoing investigation means that, by the time we finalise the investigation, we will consider the final withdrawal of the licence \u2013 or not \u2013 and of course other sanctions as well.<\/p>\n
But the first and very important implication for the entity is that it cannot conduct any more financial services business. It stops immediately.<\/p>\n
That is very important because we have reached the point where we say this is too high a risk.<\/p>\n
For the clients at this stage, they cannot be assisted by these entities anymore. Of course, they must make up their own minds about what they can do. They must get advice about how they should take this forward. They shouldn\u2019t wait for us.<\/p>\n
But if it\u2019s finally withdrawn, the licence, then one of the requirements will be that these clients are transferred to another FSP [financial services provider] because then this FSP cannot carry on business.<\/p>\n
But at the moment, no further.<\/p>\n
JIMMY MOYAHA: Gerhard, can we take a closer look at some of the reasons behind the provisional withdrawals?<\/p>\n
You mentioned, of course, that there were five [licence] withdrawals and we discussed broadly just some of the concerns that the FSCA has identified here. There seems to be a pattern emerging around some of the service providers not providing services within the borders of South Africa.<\/p>\n
I want to take a closer look at that because from an FSCA perspective \u2013 you and I have spoken about this in the past \u2013 simply because a business holds an FSP licence in South Africa does not necessarily mean that it is free to operate in any country that it wishes, in any manner that it wishes.<\/p>\n
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GERHARD VAN DEVENTER: Absolutely so. And there are some interesting things that we see happen.<\/p>\n
Unrelated to this, one of the interesting things we see is entities and people think if they split jurisdictions \u2013 in other words, if they domicile themselves in one jurisdiction but do business in another jurisdiction \u2013 they fall between the cracks. And that\u2019s of course not the case.<\/p>\n
Wherever you are domiciled, you are regulated by that financial regulator, and as such there are rules and frameworks that apply to you.<\/p>\n
So we have cases of [entities] being South African domiciled, but all of the clients are overseas. That doesn\u2019t help. That\u2019s not the solution to the problem.<\/p>\n
But what is of concern, of course \u2013 and that actually relates to one of the cases we\u2019re talking about \u2013 the bank trading.<\/p>\n
It is if you have a business in South Africa, but the investigation shows that this whole business is run from outside South Africa \u2013 there\u2019s a key individual here, but the key individual is clearly not in control of the business; it\u2019s run from elsewhere \u2013 we can\u2019t have that.<\/p>\n
We understand how impossible it is to supervise a business like that and the risks that are created in that environment.<\/p>\n
So it doesn\u2019t matter where you are domiciled, you should be regulated in that arena, and you should abide by those laws. All of those laws and rules and frameworks are designed for one thing \u2013 and that\u2019s protection of the public.<\/p>\n
Keep in mind, Jimmy, as you\u2019ve said so many times in the past, we are dealing with contracts for difference [CFDs] here, with derivative trading, online trading. It is such an extremely high-risk product, and so unsuitable for by far the majority of the investing public.<\/p>\n
JIMMY MOYAHA: And that risk associated with that product is part of the reason why it is that much more important to keep customers safe wherever possible \u2013 and that\u2019s what the FSCA aims to do.<\/p>\n
Oom, before I let you go, I want to look at some of the ongoing matters that we keep bringing to the attention of consumers. We\u2019ve touched on the warning signs from service providers around unrealistic returns, around all of the promises that are being made which lure customers in.<\/p>\n
From a service provider perspective, we are now stepping into a new space where regulated businesses are obtaining licences \u2013 and even that becomes harder to discern between the good and the bad operators there.<\/p>\n
How do consumers keep themselves safe where it relates to regulated brokers as well now?<\/p>\n
GERHARD VAN DEVENTER: You\u2019re absolutely right, Jimmy.<\/p>\n
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Because the financial service provider is regulated does not mean that it\u2019s clean.<\/p>\n
Certainly you should not even consider dealing with an unregulated entity. Apart from the fact that they\u2019re conducting a crime just by doing unregistered business, there are a lot of other reasons they don\u2019t fall in that framework. They\u2019re not supervised, there are no onsite visits, et cetera.<\/p>\n
But yes, you are right. There\u2019s a reason why we focus on the regulated businesses now, because we know that that licence brings some comfort to the public \u2013 and that\u2019s a major concern.<\/p>\n
But I think, like we\u2019ve said so many times, Jimmy, the one way that the public can look after themselves is to never, ever, get caught by unrealistic returns or by anything that doesn\u2019t look right when they\u2019re dealing \u2013 even with a regulated entity.<\/p>\n
There are so many examples of cases in the past where people were caught, and the one thing that happens in every case is that you look at what was promised \u2013 and there are two legs to these promises.<\/p>\n
The first leg is a guaranteed return. There is no such thing as a guaranteed return.<\/p>\n
And the second thing, of course, is an unrealistic return. It is just not possible. You can\u2019t do it consistently. And you know if you see an unrealistic return that it must be a scam.<\/p>\n
Of course the other thing is that the public are welcome to contact us. Firstly, we can indicate whether this is actually the financial service provider they\u2019re working with, because there are a lot of impersonations, as you know.<\/p>\n
Secondly, of course it gives us the opportunity to see, well, there is a complaint, there is something strange here \u2013 and we can go and look at our regulated entity to see whether we can understand what is going on.<\/p>\n
JIMMY MOYAHA: Folks, we can\u2019t emphasise enough how important it is that you conduct due diligence on the service providers with whom you wish to place your hard-earned monies \u2013 particularly as the world is becoming all the more concerning around finding ethical operators.<\/p>\n
We\u2019re going to have to leave this particular conversation on that note. For those interested in finding out a bit more about the complexities associated with CFDs, I penned an article about that a little while ago. It is up on the Moneyweb platform.<\/p>\n
Read:\u00a0CFDs are more complicated than the \u2018buy\u2019 button suggests<\/p>\n
For now though, we\u2019re going to leave this conversation on that particular note.<\/p>\n
The divisional head of enforcement at the Financial Sector Conduct Authority, Gerhard van Deventer, joined us to take a look at the provisional withdrawals the FSCA has made of five service providers\u2019 FSP licences, the reasons behind those, and what consumers need to be aware of.<\/p>\n
#FSCA #cracks #CFD #trading #platforms<\/p>\n","protected":false},"excerpt":{"rendered":"
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