FSB to start scam adverts

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(iStock)
(iStock)

Despite the many investment scams that the South African public is falling for, in many cases the Financial Services Board (FSB) finds its hands tied when it comes to protecting the public.

As these scams are not offering FSB-regulated products and their “advisers” are not registered with the FSB, they fall outside of its jurisdiction and become a case for the South African Police Service.

Even then, it is difficult for an individual to bring a case of fraud as it is viewed as a civil matter between two individuals. Only if sufficient individuals bring a class action, would the police get involved.

The FSB has amended the general code of conduct to curb the fraudulent use of Financial Service Provider (FSP) registration numbers.

Some schemes were found to be using legitimate FSP registration details, but not for the activities that they were registered for. It also makes it an offence to use a licence in any marketing material for unauthorised business activities.

The FSB is also clamping down on the “renting of key individuals” concept, where someone with the right credentials applies for the licence, but has no oversight of the actual business.

Caroline da Silva, deputy executive officer at the FSB, says another challenge is that a Ponzi scheme is only apparent when investors can no longer access their funds and by then it is usually too late to recover their money as the scamsters would have disappeared or spent the funds.

As a further preventative measure, the FSB is introducing a division which will scan adverts making promises of high returns and investigate the validity of these schemes.

While the regulators try and keep abreast of fraudulent activity, the onus remains on individuals to be sensible and not be taken in by “rich quick” schemes because ultimately once you have lost your money, there is little chance of you ever getting it back.

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