The Financial Sector Conduct Authority has fined Petrus Rasmus Erasmus R1.18 million and debarred him for five years for operating as a financial services provider without authorisation.
The Authority said this week its investigation found that, Erasmus collected funds from members of the public and used the funds to trade in contracts for difference (CFDs), incurring substantial losses.
Furthermore, Erasmus furnished financial advice to his clients by providing them with trading signals. Based on Erasmus’ advice, clients traded in CFDs. Many clients incurred losses.
The FSCA found that Erasmus contravened section 7(1)(a) of the Financial Advisory and Intermediary Services Act in a material way.
The Authority has it made it clear that it has individuals who provide trading signals without authorisation in its crosshairs.
Providing or publishing signals with reference to online trading in financial products falls within the definition of financial services in the FAIS Act, and people who provide such signals require an FSP licence. Providing signals without a licence is a criminal offence.
Last month, the FSCA warned the public to be cautious when conducting financial services business with Teddy Thando Mutindori, also known as “Money Teddy”, who is using a WhatsApp channel called DrillionSignals to offer forex signals.
Mutindori is not authorised to provide financial services.
Providing signals refers to the practice of persons making recommendations to their clients in respect of trades and prices in financial products. The signal provider is remunerated through a subscription fee or a percentage of profits. Even where clients incur trading losses, signal providers may benefit through commissions paid by brokers.
The FSCA said it is not unusual for signal providers to provide fictitious signals and display doubtful evidence of wealth to lure clients into participating.
It urged the public not to conduct business with signal providers who are not properly authorised. Financial services providers are only granted licences after a proper consideration of their skills, qualifications, experience, and their fit and proper standing.
