The year is not yet two months old and the Financial Sector Conduct Authority (FSCA) has issued no fewer than seven warnings against people and entities providing financial services without the required registration as financial services providers.

Most of the FSCA notices warn the public against unregistered brokers dealing in foreign exchange, contracts-for-difference (CFDs), and trading and mining cryptocurrencies.

Some of these entities inspire very little confidence – such as the most recent warning against Forex Breakout Kings (FBK) and its promoter Jerome Michaels.

The FSCA issued its standard warning: “The FSCA has received information that FBK and Mr Michaels offer to trade in forex on behalf of members of the public.

“Without commenting on the business of FBK and/or Mr Michaels, the FSCA points out that entities offering to trade in financial products on behalf of South African citizens are required to be licensed by the FSCA. The FSCA wishes to inform the public that FBK and Mr Michaels are not authorised to give any financial advice or render any intermediary services in terms of the Financial Advisory and Intermediary Services Act, 2002 (the FAIS Act).

“Members of the public should always ensure that an entity or individual is suitably authorised by the FSCA to provide the specific financial product or service being offered.”

A closer look at the self-proclaimed ‘Kings’ shows a few of the typical red flags associated with suspicious investment schemes.

Their website lacks the normal legal requirements that a proper investment company or asset manager would provide, such as a physical address, company profile, an office telephone number, postal address, legal disclaimers, a Financial Services Provider (FSP) number and the normal introduction to senior management and fund managers.

There was no answer when we called the mobile number published on the website.

Capital Pro Trade

The FSCA had somewhat more to say when it warned people against Capital Pro Trade, also written as CapitalProTrade.

“It has come to the attention of the FSCA that Capital Pro is offering the South African public access to its online platform to trade in forex and contracts for difference.

“In addition, Capital Pro provided a client with a document purporting to be an FSCA [licence] issued to it, with [the] Financial Services Provider number 164384.

“According to the records of the FSCA, FSP [licence] 164384 does not exist,” it says, adding that the broker is not registered as an over-the-counter trader in derivatives.

“The FSCA made attempts to contact Capital Pro for comment, however these attempts were unsuccessful.”

A visit to Capital Pro Trade’s website disclosed a few interesting facts. The business provides an address in well-known Oxford Street in London, which turns out to be a block of serviced offices where one can rent a hot desk, a fixed desk, or an office on a short term rental.

In addition to the fake FSP certificate Capital Pro Trade is flashing around in SA, it shows another fake certificate on its website – this one issued by a fake financial authority.

The certificate that apparently authorises Capital Pro Trade to conduct business shows that it has been issued by the Financial Security Commission of Europe (FISEU) and/or the European Financial Commission (EFC). It has two spelling mistakes, ‘comission’ and ‘commision’ instead of commission

In reality, the European Commission has several financial and economic committees and ‘commisisons’ – but the EFC does not exist.

Beyond FX

The FSCA also warned the public against Beyond FX. “For an entity to trade in or offer financial products on behalf of clients in South Africa, such an entity must be licensed to do so by the FSCA. The FSCA wishes to inform the public Beyond FX is not authorised as a FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS) to provide financial advisory and intermediary services.

“Beyond FX is also not registered as an over-the-counter derivative provider in terms of the Financial Markets Act. The FSCA made attempts to contact Beyond FX, without success,” it says.

There is a legitimate business called Beyond FX, a US film producer. (FX also means sound or visual effects in the movie industry.)

There was an internet-based broker called FX Beyond that used to operate out of Panama, but it seem to have disappeared.

Crowdfarming

The FSCA also issued a warning about the activities of an entity probably scamming people, offering investment in cattle, goats and chickens. While there are a few legitimate crowdfarming companies in SA, Livestock Capital has fallen foul of legislation.

Livestock Capital provided a client with a document purporting to be an FSCA licence with an FSP number, which according to the FSCA does not exist.

“The FSCA made attempts to contact Livestock Capital, without success,” it says.

This follows a similar warning in October 2022 against SD Farmlink, an entity proclaiming to be successful in offering people an opportunity to invest in agriculture through crowdfarming.

A mistake

What a lot of the warnings have in common is the fact that the FSCA could not contact the owners and promoters of these dubious investment schemes and bucket shops. They disappear, and rebrand their Facebook advertisements.

The FSCA announced that it had fined Globex360 R50 000 for contravening financial sector laws, as it had acted as an over-the-counter derivatives provider (ODP) while only licensed to provide advice and render intermediary services in respect of derivative instruments.

“Globex is not an authorised ODP as envisaged in the regulations, but it did submit an application for authorisation as an ODP. The application is under consideration,” says the FSCA.

“Globex fully co-operated during the investigation, has not contravened a financial sector law before and conceded that its activities fall within the scope and ambit of the ODP regulations.

As usual, the FSCA ends its warnings with the advice that people should check that individuals and businesses are duly registered as financial services providers.