We’re not out ‘to destroy any business’ – SEC

General News of Monday, 17 September 2018

Source: classfmonline.com


Sec Menzgold SagaSEC, last week issued a directive to Menzgold to halt all its business activities

The Securities and Exchange Commission (SEC), the statutory body mandated by the Securities Industry Act 2016 (Act 929) to protect investors and the interest of the general investing public, has said its commitment to carry out its mandate and protect the general public from losing their hard-earned money in Ponzi and Pyramid schemes, should not be misinterpreted as targeting to destroy certain businesses.

SEC, which is currently in a regulatory stand-off with gold-trading firm Menzgold, said, in a statement issued on its website to warn investment firms against operating Ponzi and Pyramid schemes that it is “not out to destroy anyone’s business”.

The SEC said it is “only committed to its statutory mandate to protect the interest of investors”, adding that it wishes “to advise the general public to be wary of these schemes and desist from investing their life’s savings in these schemes and unlicensed investment entities”.

The Act that set up SEC, among others things, specifically mandates it to “promote the orderly growth and development of an efficient, fair and transparent securities market in which investors and the integrity of the market are protected”.

SEC said in the statement that it has “taken note of various unlicensed financial investment schemes and products being offered publicly to the unsuspecting general public through various media forms including electronic, outdoor and mass media advertising”.

The unique selling proposition of these schemes and products, SEC said, “Is the unreasonably high rates of return or interest per month or year promised the investor public”.

Some of the guaranteed returns, it said, “range from 6%, 10%, 20%, 40% and even as high as 70% a month translating into, 72%, 120%, 240%, 480% and 840% a year, respectively”.

SEC said: “It has come to our notice that some of these high rates of promised interest are surprisingly dollar denominated.

“Proper disclosure on risk and ability to pay are not made by these entities. Operators of these unlicensed financial investment schemes are in serious breach of various provisions of the Securities Industry Act, 2016 (Act 929) and are warned to close down or risk being caught on the wrong side of the law.

“Offering such high guaranteed returns, non-disclosure of risk and ability to pay are tell-tale features of ‘Pyramid’ and ‘Ponzi Schemes’ where new or fresh money deposited by clients are essentially used to pay previous depositors since there is no real underlying investment in the first place.

“After a while, the pipe-line for fresh deposits or investments dries up leading to widespread default culminating in loss of the money supposedly invested by unsuspecting depositors or investors.

“The high rates of returns are used as a bait to get the public to fall for the scam. A promise of high returns is in essence a guarantee of high risk, which is typically the stock in trade of Pyramid and Ponzi Schemes. High risk means you could lose your entire principal”, SEC said.

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