Ponzi schemes thriving due to financial illiteracy – SEC

Lack of adequate public education on the financial sector is partly to blame for the high incidence of people falling prey to Ponzi schemes; hence, there is a need to intensify awareness on the subject, Deputy Director-General at the Securities and Exchange Commission (SEC), Deborah Agyemfra, has said.

“People are still running for products (from the unregulated space) that will harm them in the long-term. People don’t understand that if somebody gives you a guaranteed return, it is an immediate red flag.

“There is very low financial literacy, that is why many of our people have fallen for Ponzi schemes, because people don’t understand it is an unregulated space,” she said.

Given the low financial literacy, she opined that people have taken advantage of this and ‘vulnerable people’ continue to be victims in that space.

The Deputy Director-General of SEC, who was speaking during the 2nd Plenary of ‘The Money Summit,’ mentioned an occasion when people approached to query how their funds could be retrieved from some defunct banks – without realising SEC is a capital market regulator.

On how the implementation of regulations and supervision has driven investor confidence in the country, she noted that investors want a system that has laws.

“When you have the right laws and regulations, it guides people. This indicates that they are coming into an environment where things are not haphazardly done but there are laws that govern the space, especially with the financial institutions.”

For example, she said, the SEC has the Securities Industry Act, 2017, Act 929, which enjoins it to protect investors and ensure that their space is run in an efficient, fair and transparent manner.

Mrs. Agyemfra said: “Once those things are done and an investor knows the law that applies to ‘A’ will be the same law applied to ‘B’, then it gives them some level of confidence. Because the law is laid down, it is transparent, fair and efficient, and both the investors and the market that they are investing in are protected.

“And in the 2016 Act, there is an innovation that also gives SEC powers to pass guidelines, codes and directives, and these guidelines have the same force as laws,” she observed.

The Money Summit was organised by the Business and Financial Times. It was held in partnership with the Bank of Ghana with support from Hubtel, Letshego, AZA Finance, FBN Bank, Fidelity Bank, Ghana Stock Exchange (GSE) and the Securities and Exchange Commission (SEC).

This year’s theme was ‘Africa’s Economic Growth – Facilitating Investment, Payments and Settlement Systems’.

It sought to build upon the maiden edition’s resounding success by once again bringing together the best financial minds to deliberate on issues relevant to trade facilitation on the continent and the development of its financial systems – particularly because of the recently-launched Pan-African Payment and Settlement System (PAPSS).

The 2nd plenary discussed the topic ‘Enhancing Investors’ Confidence: Critical Vehicle to Driving Economic Growth’.

Source: B&FT