IN­VEST­MENT RE­FORMS ON HOLD

Weekend Argus (Saturday Edition) - - GOOD WEEKEND -

The FSB has with­drawn a dis­cus­sion doc­u­ment on sig­nif­i­cant amend­ments to the lim­its on the types of se­cu­ri­ties and as­sets in which col­lec­tive in­vest­ment scheme man­agers may in­vest.

The in­vest­ment lim­its are set out in terms of No­tice 1503 of 2005 is­sued in terms of the Col­lec­tive In­vest­ment Schemes Con­trol Act (Cisca).

The dis­cus­sion doc­u­ment pro­posed a ma­jor ex­pan­sion of the as­sets and se­cu­ri­ties that may be used, as well as eas­ing the lim­i­ta­tions on how much may be in­vested in any one se­cu­rity or as­set. The in­ten­tion was to bring South African col­lec­tive in­vest­ment schemes leg­is­la­tion in line with the Euro­pean Union’s stan­dards for col­lec­tive in­vest­ments, known as UC­ITS III.

Bert Chanetsa, the FSB deputy ex­ec­u­tive in charge of fi­nan­cial mar­kets, says the re-write of No­tice 1503 started be­fore the in­ter­na­tional fi­nan­cial cri­sis.

“Many lessons have been learned as the cri­sis has un­rav­elled. The de­ci­sion was taken to re­view the pro­posed changes in the light of th­ese im­por­tant lessons and the needs of the South African in­vest­ing pub­lic.”

At least one lo­cal unit trust man­age­ment com­pany has been af­fected by the change in tack: Corona­tion has been forced to close down a fund.

Pi­eter Koeke­moer, the head of Corona­tion Unit Trusts, says Corona­tion launched the Ir­ish­domi­ciled Global Lat­i­tude Fund on the ba­sis of UC­ITS in an­tic­i­pa­tion of the changes in South Africa. How­ever, it fell foul of the ex­ist­ing No­tice 1503, be­cause the fund was able to in­vest in any com­bi­na­tion of reg­u­lated funds man­aged by third-party man­agers and di­rect se­cu­ri­ties, whereas lo­cal reg­u­la­tions do not al­low this type of fund to have ex­po­sure to more than 20 per­cent of other funds.

No lo­cal in­vestors had money in the Global Lat­i­tude Fund, but the fund has been closed and re-opened so that it meets the ex­ist­ing No­tice 1503 re­quire­ments.

How­ever, Koeke­moer says he can­not fault the FSB’s cau­tion. “The cur­rent key con­cern with the UC­ITS frame­work re­lates to over­the-counter trades (the trad­ing of as­sets out­side of a se­cu­ri­ties ex­change),” he says.

It is un­der­stood that FSB con­cerns also ex­tend to the role of credit rat­ing agen­cies, which have been blamed in part for the fi­nan­cial mar­ket melt­down of the past year. Rat­ing agen­cies were des­tined to play a greater role in as­sess­ing non-listed se­cu­ri­ties in terms of the pro­posed changes.

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