Tips to Stay Safer from Online Trading Platform Scams
Key Highlights :
Online trading platforms are a great way to make money, but unfortunately, many scammers operate from these platforms, and the risks are high even when the provider is legitimate. Though there is no foolproof method to stay safe, there are some tips that can help you stay safer.
The Financial Sector Conduct Authority (FSCA) has made it a priority to protect consumers from fraud and misrepresentation. Fraudsters can hide easily on trading platforms, and when investors put money into a fraudulent provider, it typically leaves the country. To help protect consumers, the FSCA has issued 47 warnings to the public about entities operating without licenses or doing something illegal.
The FSCA has made it a priority to target unlicensed over-the-counter derivative providers. These providers offer trade in shares, cryptocurrencies, and commodities through a contract for difference. It is important to note that while some providers have obtained licenses before the grace period ended in June 2019, others have ignored this requirement. It is important to make sure that any intermediary you are dealing with is properly licensed.
The FSCA is also concerned about the derivative providers and platforms that local intermediaries choose to work with. It is important to do due diligence on the provider to make sure that it is regulated as a financial product. Be aware that some jurisdictions, like the Caribbean, only register companies, and do not regulate financial providers.
When investing in online trading platforms, it is important to remember that these investments are high-risk. It is not suitable for most people, and retired people should not be encouraged to trade with their pension money. It is important to make sure that any risks associated with the investments are disclosed.
The FSCA is also concerned about unauthorised crypto asset financial services. Many platforms do not actually trade in cryptocurrencies, but rather in derivatives on cryptocurrencies. These providers should be licensed as over-the-counter derivative providers. South Africa has the “dubious honour” of being home to one of the biggest cryptocurrency trading scams following the collapse of Mirror Trading International in 2020.
Copy trading, also known as mirror trading, is another area of concern on trading platforms. This practice involves one person, who considers him or herself quite a good trader, allowing investors to see and copy his or her trades. Those offering copy trading should have the appropriate financial services provider license and the right qualifications and experience.
Cryptocurrencies have been made financial products under the Financial Advisory and Intermediary Services (FAIS) Act. This means those who provide you with advice or intermediary services about these digital currencies must ensure that you understand the risks, that products are suitable for you and have been subject to a due diligence. However, it is still important to remember that cryptocurrencies are very high-risk investments.
By following these tips and doing your research, you can help protect yourself from online trading platform scams. Make sure to do your due diligence, and only invest in products that you understand and can afford to lose.
