When financial advisors formal accreditation, among other things, an admission test involves, subje

The shooting deaths of two businessmen, Herman Pretorius and Julian Williams, last month the spotlight again on Ponzi schemes dropped. How can South Africans jiffy bag their hard-earned savings with these illegal schemes jiffy bag to protect? Shané Barnard found out.
The old adage had alarm bells for investors in Herman Pretorius' Relative Value Arbitrage Fund (RVAF) clearly has flashing. Hundreds of South African jiffy bag investors have reportedly lost nearly R3,1 billion when the illegal scheme last month collapsed.
Pretorius on July 26 at the investment company jiffy bag Basileus Capital's office in Cape Town visiting his former colleague, the late Julian Williams wrote. This after the FSB suspicious gotten over RVAF by Basilues Capital management.
The RVAF, who had an illegal Ponzi scheme identified is not the first of its kind in South Africa. But what exactly is a Ponzi scheme and how you can protect yourself against it? What are Ponzi schemes?
"In essence, a Ponzi scheme but an unscrupulous person a scheme in which he adds exceptionally high returns promised to potential clients," explains Professor. JD Krige, program director of the graduate diploma in financial planning at the University of Stellenbosch.
The person who will manage the scheme in some cases possibly investors' money in the bank or unit trust which does earn interest, but the returns will not be as high as he promised investors it.
In such a scheme, new investors' money in the form of high interest to the investors get paid first. The person with the fund "managed", jiffy bag just do it in such a way that it is not easy to be caught, says Krige.
A Ponzi scheme differs in this respect from a pyramid scheme because investors no responsibility for more investors for the fund to recruit. Investors gives only a monetary jiffy bag contribution and their "returns" back into the scheme in order to earn compound interest.
Ponzi had these coupons in other countries purchased (where it was cheaper) and investors in the US resale where the coupons more valuable. The profits from these sales he made, he would then investors returns as paid. Investors queued for Ponzi promised to make 50% returns within 90 days to pay them.
Ponzi did not anticipate that the costs of international trade its profits would not eat. He decided not to his investors this development to light, and an extravagant lifestyle with their investments lined.
Krige said Madoff told investors in his scheme attracted by it exclusively to make - investors had almost queuing and even sophisticated investors' with a limp strap caught. "Said Madoff managed for 15 years" with murder get away. " What about legislation?
The South African legislation sets very strict measures to financial institutions that offer investeringsplatforms. Mutual funds, life insurance companies jiffy bag and banks must meet all these requirements.
The FSB has allegedly been eight years ago complaints from independent financial advisers receive Pretorius's scheme does not meet the necessary requirements have not. Why not vote against Pretorius acted not?
"One might justifiably ask why was the FSB so long," says Krige. "They were aware of irregularities. They dragged their feet. "How can I test myself against such a scheme to protect?
Krige said while a Ponzi scheme him always as a hedge fund to do it, promised it usually returns higher than the market norm. Prospective investors should therefore be alert and not in the attractive trap pedal.
Just as there are laws that regulate investeringsplatforms need financial advisors in South Africa also strict requirements. All financial advisers must register with the Financial Services Board to be registered.
When financial advisors formal accreditation, among other things, an admission test involves, subject themselves to the Financial Advisory and Intermediary Services (Services Act - see box).
"The purpose of this law is to protect customers," says Krige. "If a client bad advice from a financial adviser received, the customer at no charge a complaint with the Financial Services Board if." What if I already lost money?
Investors who lost money in the scandal Herman Pretorius jiffy bag lost, the liquidators can notify them a co-plaintiff. Krige explains the liquidators will in any case by the company's records, jiffy bag and investor contact, but you have every right to claim damages.
What is a hedge fund? A Hedge Fund is an investment portfolio that is very aggressively managed and often high returns promised. The driver of a verskansingsf