Online trading — from R725,000 to R4,000 in less than a year

Many inexperienced South African investors are unaware of the high risks associated with online trading and are losing money as a result.

Ombud for Financial Services Providers, Advocate John Simpson, said that forex trading and other forms of online day trading are considered high-risk investments. There is a big risk of losing all of one’s money.

In a recent case dealt with by the Ombud, a novice forex trader lost R721,040.65 over the course of several months.

The complainant was convinced by a representative to join their online trading platform, investing R725,000 with the institution.

After several months, the complainant was able to withdraw only R3,959.35. They were unable to make any further withdrawals.

In a radio interview, Advocate Simpson commented that consumers should be extremely cautious of any organizations on social media that make offers that appear too good to be true.

Some tell-tale warning signs include promising 100% ROIs, guaranteeing zero loss or flashing wealth on social media sites.

“It’s highly unlikely that a service provider registered with the FSCA doing a proper job would ever advertise in that way,” he said.

Even if the institutions are legitimate, customers often overlook the high level of expertise required for online and foreign exchange trading.

“I would safely say that 99.9% of people do not have that expertise and are at high risk of losing their money,” said Simpson.

Advocate John Simpson

To minimize the associated risks, one can take a few steps before investing via any online trading institution.

The first is to check the company’s registration, either by calling the FSCA or searching on the FSCA website. However, registration does not ensure that a company is trustworthy.

The next step is to search online and on social media for others who are not affiliated with the institution but have experience with it.

In previous cases, illegitimate online trading companies have used the registration numbers of legitimate ones as a disguise. Hence, looking beyond the FSCA registration in one’s background check is vital.

“Do your homework. It’s worth it,” said Simpson.

Consumers looking to begin online trading should also consult a financial advisor about the exact institution and investments in question.

Most financial advisors will advise against investing in online trading platforms, especially with less experienced traders.

The legitimacy of the institution one invests in also comes into play should something go wrong.

With registered online trading platforms, investors can lodge a complaint with the FSCA to resolve any concerns with the platform. If the platform has made a mistake, investors should be able to get their money back.

Unregistered or fraudulent institutions, on the other hand, can be nearly impossible to track down.

“These people operate on the ethereal level. They will advertise, promise, and you can deposit money into their account, but they don’t actually exist,” said Simpson.


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