Don’t get fleeced by online trading platforms

Fischer-French says these platforms use aggressive marketing, with many operating on a global 'churn-and-burn' model. Rather than treating clients as real investors, they treat them as sources of quick profit.

Because many of these companies operate outside South Africa’s regulatory system, it can be hard for consumers to know whether a platform is legitimate or risky.

"The problem is, we've got this influx of offshore trading platforms that now have FSPs (Financial Services Provider) or licenses to trade in South Africa."

These platforms market this in a way that suggests to investors that they are 'safe', says Fischer-French.

"But nowhere is it really explained how incredibly risky these products are, and also, quite frankly, the sales tactics behind them."

Fischer-French explains that many of these platforms are issued with an intermediary license, issued by the FSCA (Financial Sector Conduct Authority).

"So there is a local person, a local financial service provider, but they purely provide the marketing activities on behalf of these platforms."

In her investigations, Fischer-French says it has become clear that the FSCA has no oversight of what is happening in the jurisdictions where the trades are taking place.

"When I started digging into them, I understood how they were making their money, how they were able to fleece people.

"It concerns me that we are basically allowing operators in this country where our regulator doesn't actually have jurisdiction to see what is going on in those trades."

To listen to Fischer French in conversation with CapeTalk's John Maytham, click below: