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Section 65 approval on Foreign Collective Investment Schemes in South Africa

Insight 27 June 2022

Section 65 approval on Foreign Collective Investment Schemes in South Africa

Globalisation and technological innovation have connected financial systems like never before. There is an ever-present growing interest from Asset Managers to market offshore regulated portfolios to the South African general public.

A Collective investments Scheme (“CIS”) is a scheme in which a group of investors invest into a portfolio and hold a participatory interest in the portfolio. The investors share the risk and the benefit in proportion to their holdings. A foreign CIS is a CIS that is domiciled outside South Africa and is regulated by the Regulator within the relevant foreign jurisdiction where the portfolio is domiciled. Types of CIS schemes include CIS in Securities, CIS in Qualified Investor Hedge Funds, CIS in Retail Hedge Funds, CIS in Participation Bonds, and CIS in Property.

Foreign CISs that wish to market their portfolios to the South African general public would need to ensure that the scheme and funds are registered and approved by the Financial Sector Conduct Authority (“FSCA”) under Section 65 of the Collective Investment Schemes Control Act, 2002 (“CISCA”). The approval is to ensure that the offshore portfolio has a regulatory environment that is comparable to the South African regulatory environment to ensure homogeneity between the offshore and local portfolios in terms of structure and governance.

For a foreign CIS to be promoted to South African investors, the foreign investment manager must either establish a representative office in South Africa and seek authorisation from the FSCA or enter into a representative agreement with a third-party FSCA approved management company such as Sanne Management Company (RF) (Pty) Ltd (“Sanne”).

All foreign CISs who wish to solicit investments into their portfolios from members of the public in South Africa would need to apply to the FSCA indicating compliance with the conditions set out by the FSCA for approval below.

  1. A Foreign CIS manager applying for approval of a scheme must be authorized and supervised by a regulator which has a regulatory environment of similar standing to the regulatory environment of South Africa.
  2. The scheme must -

- be available for investment in its domicile of registration; and

- be promoted in South Africa to the same type of investors under the same or substantially similar requirements and conditions relating to the type of investors as in its domicile of registration.

  1. The Manager applying for approval of a scheme must -

- enter into a representative agreement; or

- establish and maintain a representative office.

  1. The Manager applying for approval of a scheme must satisfy the FSCA that:

- the scheme is sufficiently liquid to meet investor redemptions;

- the scheme does redemptions at regular intervals;

- the scheme does not permit investment in an instrument that compels the acceptance of physical delivery of a commodity and the scheme particulars or prospectus prohibits it from accepting physical delivery;

- the assets of the portfolio are properly protected by the application of the principle of segregation and identification.

  1. The FSCA may -

- require written confirmation from the applicable regulator that the Manager is fit and proper and in good standing with such regulator; and

- take into consideration any other information regarding the Manager, derived from whatever source, including any regulatory or supervisory authority, provided such information is disclosed to the applicant and the latter is provided a reasonable opportunity to respond to the information.

  1. All marketing and advertisements for foreign CIS must comply with Board Notice (“BN”) 92 of 2014 (Advertising, marketing, and information disclosure requirements for collective investment schemes).
  2. A record of all advertisements published by the Manager must be kept for a period of at least five years by the Manager.
  3. BN 74 of 2015 exempts foreign CISs from complying with certain provisions of BN 92 of 2014. Foreign CISs do not have to publish daily prices of the most expensive class and the latest TER on their website and the publishing of quarterly disclosures of certain information to investors provided that the Foreign CIS discloses certain minimum information to investors in accordance with paragraph 15(4) of BN 92 bi-annually. This should include the investment class, return for the quarter, transactions processed, management fees, and performance fees.
  4. A Manager must produce a minimum disclosure document (“MDD”) in accordance with BN 92 for each portfolio administered under its CIS, including third party-named portfolios. The MDDs should disclose information to an investor before entering transacting and for purposes of providing a general investor report to investors.
  5. A Manager must publish the general investor report on its website quarterly and must be available to investors upon request. The report must include the number of participatory interests, the net asset value (“NAV”) per participatory interest, and the expense ratio for the portfolio as per paragraph 15(5) of BN 92.

The regulatory landscape governing CISs continues to evolve, resulting in changes in reporting obligations. Asset Managers will need to partner with a trusted service provider with the necessary skills, experience, and resources. Sanne continuously monitor changing regulations to ensure regulatory compliance.

Pre-Submission Review

  • Review the foreign scheme prospectus and relevant documentation such as the annual financial statements, manager company information, representative agreement, and the regulator letter.
  • Perform Customer Due Diligence (“CDD”) checks and operational due diligence on the foreign scheme and related funds and related stakeholders

Submission Process to the FSCA

  • Facilitate the completion of all the required application documents.
  • Prepare the representative agreement.
  • Facilitate the preparation of the motivation letter.
  • Monitor the application process.
  • Regular correspondence with FSCA.

Ongoing Compliance Support and Maintenance

  • Compliance monitoring and regulatory submission of all marketing material including but not limited to minimum disclosure documents, brochures, presentations, application forms, and advertisements.
  • Monitoring the submission of quarterly statistical information. To be submitted by the foreign manager within 30 days after the end of each quarter.
  • Ensuring that levies are paid by the foreign manager within required deadlines (levy statement will be sent through to the foreign manager once such statement is obtained from the regulator).
  • Review of any amendments to the scheme or fund legal documentation and submission to FSCA for approval, as required

Facts about Sanne Manco

  • Approved and regulated by the FSCA.
  • Sanne Manco has a record of accomplishment in providing management company services

Collective Investment Schemes are generally medium- to long-term investments. The value of participatory interests (units) may go down as well as up. Past performance is not necessarily a guide to future performance. Collective investments are traded at ruling prices and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions, as well as a detailed description of how performance fees are calculated and applied, is available on request from Sanne Management Company (RF)(Pty) Ltd (“the Manager”). The Manager does not provide any guarantee in respect to the capital or the return of the portfolio. The Manager is registered and approved by the Financial Sector Conduct Authority under CISCA. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. Forward pricing is used. The Manager retains responsibility for any portfolio marketed on its platform. Where foreign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees. This document is for information purposes only and does not constitute or form part of any offer to issue or sell or any solicitation of any offer to subscribe for or purchase any particular investments. Opinions expressed in this document may be changed without notice at any time after publication. We therefore disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable directly or indirectly to the use of or reliance upon the information.

Contact Details
Representative Office:
Sanne Management Company (RF) (Pty) Ltd, Registration number: 2013/096377/07 Physical address: Pier Place, Heerengracht Street, Foreshore, Cape Town, 8001. Telephone number: +27 21 202 8282 Fax number: +27 21 202 8282 E-mail address: Website:

Written by Sanne's Nigel Moyo, Business Development Specialist and Matthew Pykstra, Director and Head of Manco.

For additional information, or to discuss any of the topics highlighted above, please get in touch with Matthew Pykstra and Nigel Moyo directly.

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