The Financial Sector Conduct Authority (FSCA) has warned the public against conducting “any financial-related business” with forex trading platforms that promise an income stream during the Covid-19 lockdown.
The FSCA said in a statement on Wednesday that it was alerted to some forex trading platforms telling the public that risks associated with forex trading were quite low and that people with limited trading experience could earn a steady income in volatile financial markets.
These platforms also offer Contracts for Difference (CFDs), a highly leveraged financial product that could result in significant losses, the FSCA warns.
“Even though these trading platforms offer demo accounts, these accounts have been set up to simulate normal trading conditions that would lead to favourable outcomes, and do not simulate the high volatility the financial markets are currently experiencing,” the regulator said.
The regulator further said that, although some of these financial service providers (FSPs) are licensed under the Financial Advisory and Intermediary Services Act, they also need to be licensed as OTC Derivative Providers in order to trade CFDs.
Consumers who wish to conduct financial services with an institution or person are advised to check beforehand with the FSCA on 0800 110 443 or on www.fsca.co.za whether such an institution or person is authorised to render financial services.
* Compiled by Carin Smith