In the last few months there has been an increase in public cautions released by the Financial Sector Conduct Authority (FSCA) with regards to dealing with various investment schemes.
“The increasing numbers and popularity of stokvels and the reliability members place on them have resulted in scammers trying to swindle members out of their hard-earned savings and investments. Scammers pose as legitimate stokvels, investment schemes or property stokvels,” according to the FSCA.
The National Consumer Commission (NCC) is also pleading with the public to be vigilant of pyramid schemes while trying to explore other sources of income. This after the National Consumer Tribunal (NCT) fined Up Money (PTY) Ltd an administrative fine of R1 million for conducting a pyramid scheme and contravening Section 43 (2) of the Consumer Protection Act (CPA).
According to the media, Up Money was referred to the tribunal following the NCT investigations into allegations that the “stokvel” was a pyramid scheme. Last year, the scheme had about 230 000 members. Up Money had promoted its scheme as a “stockvel” to gain members. The scheme promised participants on its website that they could “turn” R20 into groceries and R500.
Acting National Consumer commissioner Thezi Mabuza said pyramid schemes were prohibited in South Africa. “Pyramid schemes continue to mushroom daily, especially on social media platforms, and consumers continue to lose their hard-earned money,” according to Mabuza.
“We want to send a strong message to operators of schemes, arrangements, or practices like Up Money that as the consumer protector in the space, we will not tolerate the contravention of the Act.”
The FSCA also published an article that highlights the difference between a legal stokvel and an illegal pyramid or ponzi scheme. Click here to download and share with your client.