Nobody is allowed to act as a financial service provider and give financial advice without being registered with the FSCA.
The FSCA has debarred a financial advisor and fined him R1.18 million for working as a financial services provider without being registered.
The Financial Sector Conduct Authority (FSCA) debarred Pierre Erasmus for five years and imposed an administrative penalty that includes the cost of the FSCA’s investigation.
The FSCA already warned the public in November 2023 to act with caution when conducting financial services business with FX Squad, which was not registered as a company and Petrus Rasmus Erasmus, known as Pierre.
In its warning the FSCA said it received information that Erasmus and FX Squad offered to trade in forex on behalf of consumers and that Erasmus and FX Squad may be conducting unregistered financial services and/or the business of a bank by taking deposits from members of the public.
“The investigated parties are not authorised to render any financial advisory and/or intermediary services in terms of the Financial Advisory and Intermediary Services Act and are also not registered as banks in terms of the Banks Act,” the FSCA said.
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FSCA investigation showed Erasmus collected funds like a bank
The evidence collected during the FSCA’s investigation showed that Erasmus offered his services and acted as a financial services provider without authorisation. The FSCA says in a statement that Erasmus collected funds from members of the public (clients) and used it to trade in contracts for difference (CFDs).
According to Investopedia, a CFD is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled, while there is no delivery of physical goods or securities. The FSCA says he incurred substantial losses during his trading activities.
Erasmus also gave financial advice to his clients by providing them with trading signals. A trade signal is a trigger to buy or sell a security and is generated by various analyses, such as technical indicators and mathematical algorithms, according to Investopedia. Many clients incurred losses when they traded in CFDs based on Erasmus’ advice.
The FSCA found in its investigation that Erasmus contravened section 7(1)(a) of the Financial Advisory and Intermediary Services (FAIS) Act in a material way. The practice of providing trading signals amounts to financial advice and that requires a financial services provider licence in terms of the FAIS Act.
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How to check if someone is registered and licensed
The FSCA says consumers should always check:
- That an entity or individual is authorised by the FSCA to provide financial products and services, including giving recommendations about how to invest;
- What category of advice the person is registered to provide, as there are instances where companies or people are registered to provide basic advice for a low-risk product and then offer advice on far more complex and risky products; and
- That the financial services provider (FSP) number the entity or individual offering financial services uses matches to the name of the FSP on the FSCA database.
You can confirm the status and FSP number of a service provider or someone who claims to be an authorised service provider by calling the FSCA on its toll-free number at 0800 110 443.
You can also do an online check for an authorised financial institution by licence category at https://www.fsca.co.za/Regulated%20Entities/Pages/List-Regulated-Entities-Persons.aspx or an online search for a financial institution that is an authorised FSP in terms of the FAIS Act at https://www.fsca.co.za/Fais/Search_FSP.htm.
