South Africa: Asset Management: South Africa 2014

Last Updated: 29 November 2013
Article by Johan Loubser and Andrea Minnaar

Most Read Contributor in South Africa, September 2016


The regulatory requirements affecting the asset management industry in South Africa are continuously being refined by the applicable policymakers and regulators. For example, in the past year the Financial Markets Act (Act 19 of 2012) replaced the Securities Services Act (Act 36 of 2004), and a new regulatory framework for credit ratings agencies was introduced by the Credit Ratings Services Act (Act 24 of 2012). Specific themes emerging from recent and ongoing reforms concern the adoption of direct regulation in respect of all persons playing a role in the financial sector, the adoption of reforms to ensure that clients are treated fairly and adherence to regulatory proposals of international bodies in the aftermath of the global financial crisis. These and other changes are discussed below against the background of a high level overview of relevant regulatory requirements.


i           Main regulators

The national government department responsible for setting policy in respect of the regulation of private and public sector investment in South Africa is the National Treasury headed by the Minister of Finance. The main regulators responsible for administering applicable legislation are the Financial Services Board (the FSB) and the South African Reserve Bank (the SARB).

The FSB supervises and enforces compliance with the laws regulating financial institutions and the provision of financial services1 The FSB is organised in sector-specific departments, each headed by a registrar and deputy registrar (e.g., the Pension Funds Department is headed by the Registrar of Pension Funds). The legislation administered by the FSB is fragmented, with a specific piece of primary legislation applying to each of the different types of financial institutions and financial services providers regulated by the FSB, namely exchanges, clearing houses, securities depositories, trade repositories, credit ratings agencies, insurance companies, pension funds, collective investment schemes, friendly societies and financial services providers2 Broadly speaking, subordinate legislation is made by the Minister of Finance, while the FSB is given wide powers to regulate approved financial institutions and financial services providers through conditions, directives, rules and the like.

The SARB is responsible, inter alia, for formulating and implementing monetary policy, supervising the banking sector and administering South Africa's system of exchange controls.3

It is the stated policy aim of the government to move toward a twin peaks model of regulation, in terms of which supervision and monitoring of the health and soundness of financial institutions will generally be exercised by the SARB, and financial market conduct will be regulated by the FSB.4  The government published a detailed policy document in this regard in February 2013.5

Another increasingly active regulator, the Financial Intelligence Centre, is responsible for administering the anti-money laundering and related requirements of the Financial Intelligence Centre Act (Act 38 of 2001).

ii         Intermediaries and advisers

This chapter will focus on various regulatory matters affecting financial institutions and investment vehicles. It should be noted, persons (other than providers who are specifically regulated in terms of other legislation, such as stockbrokers and managers of collective investment schemes)6  who provide intermediary services or advice to clients in respect of financial products (including insurance products, bank deposits and securities) in South Africa are subject to detailed regulation under the Financial Advisory and Intermediary Services Act (Act 37 of 2002) (the FAIS Act).

At present, the following four types of licences issued under the FAIS Act are relevant in the asset management context:

  1. category I (issued to financial services providers providing non-discretionary intermediary services or advice);
  2. category II (issued to financial services providers who provide discretionary fund management);
  3. category IIA (issued to financial services providers who manage hedge funds on a discretionary basis); and
  4. category III (issued to administrative financial services providers who aggregate client funds or securities, often through providing one-stop investment platform services).

Such licence holders (termed authorised financial services providers) are bound by principles and rules set out in applicable codes of conduct created by the FSB.

A recent requirement introduced by the FSB in relation to financial services providers is that individuals exercising oversight over the rendering of financial services by a licence holder under the FAIS Act (termed key individuals) or who represent the licence holder in rendering financial services to clients (termed representatives) must, in order to illustrate the required level of competence, successfully complete certain regulatory examinations prescribed by the FSB.7  A limited exemption applies to this requirement in respect of licence holders not domiciled in South Africa who are licensed under the FAIS Act to provide intermediary services only.8


Investor funds are commonly pooled for investment purposes through two types of FSB-regulated financial institutions, namely collective investment schemes and long-term insurance companies who issue linked policies.

Other types of investment structures (not directly regulated by the FSB) include exchange traded funds (other than those registered as collective investment schemes) and private investment vehicles housed, for example, in partnerships and trusts.

i          Collective investment schemes

Collective investment schemes are managed and administered by a manager9  The administration of each scheme is overseen by a trustee or custodian.10  Each scheme is established by way of an agreement (referred to in the legislation as a deed) between the manager and the trustee or custodian.11 In practice, the terms of such agreements follow model wording provided by the FSB. A scheme would typically have more than one portfolio or fund. Prior FSB approval is required before a person may act as a manager, or a trustee or custodian, and before the manager may establish a scheme or a portfolio. To date, collective investment schemes have been regulated on the basis that all approved schemes should be suitable for investment by members of the general public. There are no schemes that are subject to a lighter degree of regulation on the basis of limited distribution practices or the sophistication of investors.

Three types of domestic collective investment schemes are currently permitted: collective investment schemes in securities, property and participation bonds12  Collective investment schemes in securities (which also include money-market funds, feeder funds and funds of funds) make up the overwhelming majority of the approved schemes, and collective investment schemes in property and participation bonds are relatively rare.13

Collective investment schemes are subject to detailed prudential investment requirements. Board Notice 80 of 2012 (BN80), which came into effect on 1 July 2012, sets out the portfolios that may comprise a collective investment scheme in securities, the types of investments that may be included in portfolios of a collective investment scheme in securities, as well as the conditions, limits and the manner in which the portfolios and securities may be included. It also sets out the conditions for inclusion of listed and unlisted derivative instruments in a portfolio. Collective investment schemes in securities are open-ended, and managers are typically required to provide valuations and redemptions on a daily basis.

Broadly speaking, foreign collective investment schemes may not be marketed to members of the public in South Africa unless the applicable scheme has been approved by the FSB.14  The current requirements for approval include considering whether or not the foreign jurisdiction in which the foreign collective investment scheme is domiciled has a regulatory regime for collective investment schemes of at least the same standing as that of South Africa, and whether the foreign collective investment scheme poses investment risks that are higher than would be permitted for a comparable scheme in South Africa.15 The requirements (which disqualify many foreign collective schemes from approval) are currently being reviewed and, to this end, the FSB has published draft revised requirements for public comment.16

ii         Linked policies

A well-known financial product used for investment purposes is a linked policy issued by a long-term insurance company. A linked policy is a long-term policy of which the amount of the policy benefits is not guaranteed by the long-term insurer, but is to be determined solely by reference to the value of particular assets or categories of assets that are specified in the policy and are actually held by or on behalf of the insurer specifically for the purposes of the policy.17 Given the circumscribed nature of the insurer's liability under such a linked policy, assets in which a linked policy is invested need not be spread in accordance with the prescribed prudential investment requirements for insurance companies.18 The policyholder or its investment manager usually specifies the assets or types of categories of assets to be held by the insurer for the purposes of the policy. Use of an insurance policy in the above circumstances is often referred to as making use of a life wrapper.

iii        Other structures

One of the most significant new trends in the South African asset management sector has been the growth in passively managed funds, with exchange traded funds becoming more prevalent as an asset class. As of June 2013, more than 30 exchange traded funds were listed on the equity market of the Johannesburg Stock Exchange (the JSE).19  Exchange traded funds could in certain circumstances fall to be regulated as collective investment schemes, and would otherwise typically fall to be regulated by the Companies Act20 and the JSE.

We discuss two common vehicles used for private investment structures, namely the en commandite partnership and the bewind trust, in our discussion of hedge funds and private equity funds in Section VI, infra.


Asset managers, capital markets and investment products are utilised predominantly by a small segment of the population, consisting mainly of institutional investors and a relatively small number of high net worth individuals. Investment infrastructure is mostly inaccessible to the majority of the South African adult population, most of whom live at or below the poverty line and millions of whom do not have a bank account.21

i          Capital markets

The JSE is the largest exchange in Africa with an equity market capitalisation of approximately 8.7 trillion rand at the end of July 2013.22 The JSE also operates commodity, equity and currency derivatives markets and an interest rate market.23

ii         Assets under management

According to the FSB,24  in December 2011 long-term insurers had assets of 1.73 trillion rand, short-term insurers had assets of 84 billion rand, and in December 2010 public and private pension funds had assets of 2.193 trillion rand.25 According to Association for Savings and Investment South Africa (ASISA),26 South Africa's collective investment schemes industry had approximately 1.2 trillion rand under management as at 31 March 2013.

The private equity industry had an estimated 126.4 billion rand under management as at 31 December 2012.27 The hedge fund industry had an estimated 33.6 billion rand under management as at the end of June 2012.28


i          Regulation of previously unregulated participants and investments

The FSB has taken significant steps to close what it perceives to be regulatory gaps and to exercise regulatory control over key players in the asset management industry. The recently enacted Credit Ratings Services Act (Act 24 of 2012) creates a regulatory framework administered by the FSB for the registration of credit rating agencies and the provision of credit rating services in South Africa. The newly enacted Financial Markets Act provides, inter alia, a regulatory framework pursuant to which detailed regulation of over-the-counter derivatives may be established in future (including the establishment of local and offshore trade repositories29 and independent clearinghouses30 ). The FSB also intends to publish conditions for investment in derivative instruments by pension funds, which will set clear parameters for the investment by pension funds in certain derivative instruments.31 In March 2012, the FSB published conditions32  for investment by pension funds in private equity funds. It is expected to require hedge funds to be registered under CISCA and to publish conditions for investment by pension funds in hedge funds.33

ii         Reforms aimed at ensuring that clients are treated fairly

The FSB is in the process of developing a Treating Customers Fairly programme for regulating the market conduct of financial services firms.34  This programme will seek to ensure that fair treatment of customers is embedded in the culture of financial firms, and it will be based on a combination of market conduct principles and explicit rules coupled with regular review of applicable reports by the FSB. Although the programme has not yet been finalised (and will only be finalised and come into effect during 2014 or possibly 2015), many firms are already evaluating their practices against the applicable outcome-based principles.

As part of the ongoing investigation of possible measures to promote household savings and reform the retirement industry, National Treasury recently published a technical discussion paper for public comment on charges in the retirement industry.35  This document will likely form part of a wider debate in respect of possible regulation of the charges financial sector firms levy against client investments.

A reform that has been completed and is in effect relates to the more detailed regulation of actual and possible conflicts of interest of financial intermediaries and advisers licensed under the FAIS Act, including the requirement that such persons must adopt and implement a conflict of interest management policy.36

iii        Increasingly sophisticated regulatory measures and emulating offshore developments

An example of the increased sophistication in the regulatory oversight exercised by the FSB and its emulation of offshore developments is the Solvency Assessment and Management framework (the SAM framework), which is being developed by the FSB for the purposes of establishing a risk-based supervisory regime for the prudential regulation of both long-term and short-term insurers in South Africa (including reinsurers). The SAM framework is intended to align the South African insurance industry with international standards, specifically the Solvency II regime implemented for European insurers and reinsurers. Final implementation of the SAM framework is currently envisaged to be 1 January 2016, but insurers will be expected to calculate and report on the regulatory requirements under the SAM framework from the beginning of 2015 in parallel with the existing regime.37  Certain interim measures relating to the governance, risk management and internal controls of insurers will be put in place by means of a legislative amendment, with effect from 2014.38


i          Insurance


The South African insurance industry is split between the long-term insurance industry (otherwise known as life insurance) and the short-term insurance industry (typically termed general insurance in other countries).

Regulatory framework

South Africa's long-term insurance industry is regulated by the LTIA39  while the short-term insurance industry is governed by the Short-term Insurance Act (the STIA).40  There is no bespoke legislation in place for the reinsurance industry, which is currently regulated by the aforementioned acts, but the South African regulator is considering overhauling the legislative framework of the reinsurance industry in South Africa.41
South African insurers have an obligation to ensure that they are always able to meet their liabilities and their capital adequacy requirements, as determined by the insurer's statutory actuary.42  To this extent, insurers have to adhere to specific prudential spread requirements, which set out the maximum permitted holdings in particular kinds of assets.43  Compliance with both the capital adequacy and prudential requirements is verified through the submission to the FSB of unaudited quarterly returns and the audited annual returns. In order to protect their assets, insurers are prohibited from encumbering their assets, borrowing any asset and giving security in relation to obligations between other persons.44  Insurers may furthermore only invest in derivatives for the purpose of reducing investment risk or for efficient portfolio management, and securities lending is subject to specific requirements, including the holding of adequate collateral in the form of cash or securities, or both. 45


We have noticed an increased interest in offshore and local investment offerings to South African high net worth individuals and institutional investors through policies (including linked policies) issued by long-term insurance companies. We have also noted that private sector pension funds are becoming increasingly interested in outsourcing their pensioner liabilities to long-term insurers.

ii         Pensions


South African pension funds that are registered under the Pension Funds Act (Act 24 of 1956) (the PFA) are regulated in terms of the PFA by the FSB.46  In March 2011 the Minister of Finance published new regulations prescribing the prudential investment limits applying to pension funds. These investment limits are commonly referred to as Regulation 28.47

Overview of Regulation 28

The board of trustees of a pension fund has a fiduciary responsibility to act in the best interest of the members of the fund, whose benefits depend on the responsible management of the pension fund's assets. In the FSB's view, there is a general lack of investment expertise among trustees of pension funds, and therefore the relatively new Regulation 28 remains primarily rules-based.48  Regulation 28 specifies that a pension fund may appoint specialist advisers such as asset managers, asset consultants and risk consultants to assist with investment decisions, but the board of the pension fund ultimately remains responsible for the management of the pension fund's assets.49

Asset limits

A pension fund may only invest in the kinds of assets specified in Regulation 28, and within the relevant issuer and aggregate limits that are defined per asset class. By way of example, Regulation 28 limits the maximum exposure of a pension fund to equity securities to 75 per cent of the aggregate fair value of the total assets of a fund,50  and provides that (in addition to relevant sub-limits) the total exposure of a pension fund to unlisted debt instruments, unlisted shares, unlisted interests in property companies, hedge funds, private equity funds and any other asset not specifically referred to in the relevant schedule may not exceed 35 per cent of the aggregate fair value of the total assets of a pension fund.51  Should a pension fund be of the opinion that it would be prudent to exceed any of the prescribed limits, it can approach the FSB for a possible exemption.52 

The look-through principle

When determining the asset class of a specific asset for the purposes of determining compliance with Regulation 28, a pension fund must apply the look-through principle. In terms of this principle, which is intended to prevent the circumvention of the prescribed limits, a pension fund must always disclose and report on the underlying assets to which it has economic exposure if the instrument directly held by the pension fund merely provides a conduit to such exposure.53  The principle does not apply to investment by pension funds in private equity and hedge funds that conform to the conditions prescribed in Regulation 28.54

Borrowing restrictions

A pension fund may only borrow for bridging purposes to maintain sufficient liquidity for its operational requirements.55

Securities lending

A pension fund may engage in securities lending, subject to certain prescribed conditions under Board Notice 2 and 4 of 2012 (the Securities Lending Notice). Any securities that are subject to a securities lending transaction remain the assets of the pension fund (and therefore subject to the Regulation 28 prudential spread limits) and must be disclosed in the annual financial statements of the pension fund as assets of the pension fund.

Pension funds may only conclude securities lending transactions in terms of a legally binding written agreement with the counterparty that complies with the definition of a master agreement as contemplated by Section 35B of the Insolvency Act,56  and such agreement must furthermore comply with certain requirements set out in the Securities Lending Notice.57  Post-insolvency set-off is, as a general rule, not permitted under South African law, but Section 35B of the Insolvency Act allows for netting and set-off provisions contained in such master agreements to be enforced post-insolvency of a party to such an agreement.


Regulation 28 allows pension funds to invest in derivative instruments subject to certain prescribed conditions. As of July 2013 these conditions have not yet been finalised.


A growing trend has been the implementation of a number of liability matching strategies by South African pension funds. These can take a number of forms, including structured bank deposits, swap and bond transactions, long-term policies, outsourcings and active mandates. Central to many of these cash-flow matching transactions is the hedging of inflation-related risks.

iii       Real property

Insurance companies and pension funds are significant investors in commercial property. Two other types of South African institutional investors who invest in commercial property are property unit trusts and property loan stock companies. Property unit trusts are collective investment schemes in property regulated as collective investment schemes by the FSB. Property loan stock companies are not directly regulated by the FSB. The term loan stock signifies the practice of such companies to issue linked units to investors, with each linked unit consisting of an equity share and a variable rate debenture. Due to proposed amendments to the tax legislation in respect of the deductibility of interest, property loan stock companies may be utilised less in future. Both property unit trusts and property loan stock companies are often listed on the JSE.

In terms of recent amendments to the tax legislation and the JSE listing requirements, the internationally recognised real estate investment trust (REIT) framework has been introduced in South Africa. Broadly speaking, to qualify as a REIT, an entity must be listed with the JSE and classified by the JSE as a REIT. A REIT is exempt from capital gains taxation on the disposal of its assets. In addition, distributions by a REIT are deemed to be expenditure incurred by the REIT in the production of income, and therefore fully deductible from the revenue of that REIT if, during a particular year of assessment, more than 75 per cent of the gross income of that REIT consists of amounts received by or accrued to the REIT in the form of rentals or other similar amounts derived from immoveable property, or amounts received by that REIT by way of a distribution from another REIT. Such distributions will be deemed to be rental from a source in South Africa and taxable in the hands of the investors in the REIT.

iv        Hedge funds

At present, provided that hedge funds are not offered to members of the public, the structures in which hedge funds are housed are not directly regulated by the FSB. For various reasons, the investment structures in which the majority of South African hedge funds are typically housed are either en commandite partnerships or debenture structures.

En commandite partnerships are regulated by the common law. The main advantage of this type of partnership is that a commanditarian, or limited partner, is not liable for the debts of the partnership in an amount greater than its investment commitment to the partnership (provided applicable common law requirements are met).58  The managing partner (also known as the general partner) has unlimited liability for the debts of the partnership.

Investors in debenture structures subscribe for debentures issued by a company. The company lends or contributes the proceeds of such subscription to a trust. The trust appoints a hedge fund manager to manage its portfolio of assets, and vests income and gains resulting from the portfolio in the holders of the debentures (in their capacity as beneficiaries of the trust).

Pension funds are significant investors in hedge funds. Under Regulation 28 pension funds are permitted to invest up to 10 per cent of their assets in hedge funds, subject to such conditions as the FSB may prescribe. The FSB published draft conditions for comment in June 2012, but the conditions have not been finalised as at August 2013.

In terms of a September 2012 policy document,59  the National Treasury and the FSB propose to regulate hedge funds directly as a new and separate category of collective investment scheme under CISCA. In terms of the proposal, hedge funds will be categorised as either restricted hedge funds or retail hedge funds. According to the policy document, restricted hedge funds will be subject to lighter regulatory requirements and must have a restricted investor base consisting only of qualified investors who invest pursuant to private arrangements. Retail hedge funds, which will be permitted to market themselves more widely, will be subject to a greater degree of regulation and will, inter alia, be required to meet investor redemption requests within 14 days and publish a key investor information document containing short-form prescribed information to assist investors to understand the investment product, and will be subject to prescribed prudential investment requirements.

v         Private equity

At present, provided that private equity funds are not offered to members of the public, the structures in which private equity funds are housed are not directly regulated by the FSB. For various reasons, the investment structures in which the majority of South African private equity funds are typically housed are either en commandite partnerships or bewind trusts.

The basic features of an en commandite partnership are set out above.

A bewind trust is a type of trust vehicle registered under the Trust Property Control Act,60   in terms whereof the applicable assets that are subject to the trust arrangements are owned by the beneficiaries of the trust, but the trustees of the trust hold and manage such assets.61   In the context of a private equity vehicle structured as a bewind trust, the cash contributions of the investors to the trust form the initial assets of the trust. Each investor is a beneficiary of the trust, and the investors own the assets of the trust jointly in undivided shares in proportion to their respective contributions.

Pension funds are significant investors in private equity funds. Under Regulation 28 pension funds are permitted to invest up to 10 per cent of their assets in private equity funds, subject to such conditions as the FSB may adopt. The FSB has issued binding conditions for investment by a pension fund in a private equity fund.62

vi        Other sectors – the Public Investment Corporation (the PIC)

The PIC is the principal asset manager for South Africa's public sector (including the Government Employees Pension Fund) and has, as an additional mandate, the obligation to contribute to economic development. The PIC is wholly-owned by the South African government. It is regulated by its own statute, the Public Investment Corporation Act,63   and as a public entity is bound to comply with the financial management and governance provisions of the South African Public Finance Management Act.64   As at 31 March 2012 it reported assets of 1.17 trillion rand under management.65

The PIC has allocated 5 per cent of its funds under management for investment in Africa other than in South Africa, and 5 per cent of its funds in offshore investments other than in Africa as at 31 March 2011.66   Furthermore, it is active in promoting environmental, social and governance issues in the South African marketplace, and is one of the key supporters of the recently drafted Code for Responsible Investing in South Africa.67


South African tax legislation has been, and continues to be, subject to numerous changes that affect the asset management industry. A number of the pertinent changes (and proposed changes) that have occurred in the past year are set out below.

i          Interest withholding tax

An interest withholding tax has been introduced, which is proposed to take effect from 1 January 201568   at an expected rate of 15 per cent on any interest paid to a non-resident to the extent that the interest is regarded to be from a source within South Africa (in this regard, certain deeming source rules have been introduced). Final details of the interest withholding tax provisions are not currently known.

ii         Hybrid debt and hybrid interest

New rules have been proposed in respect of the deductibility of interest, limiting the amount of interest that is deductible in respect of certain restructure transactions or in respect of debt where there is a controlling relationship between the debtor and the creditor, and delaying the deduction until such time as the interest is included in the income of the debtor where certain controlling relationships are present. Furthermore, in terms of the proposed amendments, debt that contains equity-like characteristics will be treated as equity for South African income tax purposes.69

iii       Changes to the tax treatment of collective investment schemes

The changes in the regulatory treatment of hedge funds as collective investment schemes have prompted a number of proposed amendments to the tax treatment of collective investment schemes. In terms of existing law, collective investment schemes are exempt from capital gains tax. Amounts other than amounts of a capital nature that are distributed by the collective investment scheme to the holders of participatory interests by no later than 12 months after receipt or accrual of the amount, is deemed to have accrued directly to the holders for tax purposes. Redemptions or disposals of participatory interests in collective investment schemes are treated in accordance with ordinary principles (i.e., capital gains tax if the participatory interests are held as capital assets (or deemed to be capital assets if they were held for more than three years) or income tax if the participatory interests are held as revenue assets). The proposed amendments that are currently being considered include an income tax exemption (in addition to the existing capital gains tax exemption) for collective investment schemes and the deemed revenue treatment of disposals or redemptions of participatory interests in restricted funds (which issue participatory interests to the general public, but only to qualifying investors). The proposed amendments are currently being considered and debated, and certainty regarding the proposed amendments will only be obtained when the final Taxation Laws Amendment Bill, 2013 is released.


Significant new developments on the horizon are the introduction of the FSB's Treating Customers Fairly programme, the introduction of the SAM framework for insurers, the introduction of regulation under CISCA for hedge funds, ongoing tax changes in relation to the treatment of interest and the introduction of the twin peaks regulatory model. While the precise nature of these reforms is not yet finalised, they are likely to have a marked impact on the South African asset management industry.

With respect to specific regulatory measures, in the next 12 months the industry expects to see the finalisation of the respective conditions under Regulation 28, subject to which a pension fund may have exposure to derivative instruments and to hedge funds and the finalisation of a number of changes to the present regulatory framework, as contemplated in the Financial Services Laws General Amendment Bill 2012.


1 Section 3(a) of the Financial Services Board Act (Act 97 of 1990).

2 See, for example, the Collective Investment Schemes Control Act (Act 45 of 2002) (CISCA), Financial Advisory and Intermediaries Services Act (Act 37 of 2002), Friendly Societies Act (Act 25 of 1956), Long-term Insurance Act (Act 52 of 1998), Pension Funds Act (Act 24 of 1956), Short-term Insurance Act (Act 53 of 1998), Financial Markets Act (Act 19 of 2012) and the Credit Ratings Services Act (Act 24 of 2012).

3 See Section 10 of the South African Reserve Bank Act (Act 90 of 1989).

4 National Treasury Budget Vote Speech delivered in Parliament on 18 May 2011 by the Minister of Finance, Pravin Gordhan, p. 7.

5 'Implementing a twin peaks model of financial regulation in South Africa', published on 1 February 2013 for public comment by the Financial Regulatory Reform Steering Committee.

6 Section 45(1)(a)(i) and (ii) of the FAIS Act provides that any authorised user, clearing house, central securities depository or participant as defined in Section 1 of the Securities Services Act, 36 of 2004, and a manager as defined in Section 1 of CISCA, shall be exempt from the application of the FAIS Act to the extent that the rendering of financial services is regulated by or under those Acts respectively.

7 Determination of Fit and Proper Requirements for Financial Services Providers, 2008, Paragraphs 6 and 10.

8 Board Notice 166 of 2011.

9 Sections 4 and 5 of CISCA.

10 Sections 68 and 69 of CISCA.

11 Section 97 of CISCA.

12 Parts IV, V and VI of CISCA.

13 The FSB website lists only six approved collective investment schemes in property and the same number for collective investment schemes in participation bonds (, accessed on 4 August 2013).

14 Section 65(3) of CISCA.

15 Paragraphs 3 and 6(a) of GN 2076 of 1 August 2003.

16 Draft Notice on Foreign Collective Investment Schemes, 2013, published for public comment by the FSB in September 2013.

17 See the definition of linked policy in Section 1 of the Long-term Insurance Act (Act 52 of 1998) (the LTIA) read with Directive 146.A.i of 30 June 2010.

18 Section 31(1) of the LTIA.

19, last accessed 4 August 2013.

20 Act 71 of 2008.

21 The World Bank Group, South African Economic Update: Focus on Financial Inclusion, May 2013, p. 17.

22 JSE Equity Market Profile (JSE Equity Market Statistics, 26 July 2013), accessed from on 4 August 2013.

23, last accessed on 4 August 2013.

24 See the FSB 2012 Annual Report, pp. 63, 65 and 72.

25 The long-term insurers' assets include assets of pension funds managed by insurance companies.

26 ASISA, local fund statistics: , last accessed on 4 August 2013.

27 KPMG and SAVCA, Venture Capital and Private Equity Industry Performance Survey of South Africa covering the 2012 calendar year (June 2013):, last accessed on 4 August 2013.

28 Novare Investments 2012 Hedge Fund Survey: , last accessed on 4 August 2013.

29 Chapter VI of the Financial Markets Act.

30 Chapter V of the Financial Markets Act.

31 See Section VI.ii, infra.

32 Notice No. 1 of March 2012: Conditions for Investment in Private Equity Funds, Approval in Terms of Section 5(2)(e) of the PFA.

33 See Section VI, iv infra.

34 FSB: Treating Customers Fairly: The Roadmap (31 March 2013).

35 National Treasury: Charges in South African Retirements Funds (11 July 2013).

36 Paragraph 3 and 3A of the General Code of Conduct for Authorised Financial Services Providers and Representatives, BN80 of 2003 (as amended).

37 FSB: Solvency Assessment and Management, 2013 Update, March 2012, p. 29.

38 See the Insurance Laws Amendment Bill 2013 and explanatory documents at, last accessed on 4 August 2013.

39 Long-term Insurance Act (Act 52 of 1998).

40 >Act 53 of 1998.

41 FSB: Terms of Reference, Solvency Assessment and Management, Revised Regulatory Framework for Reinsurance Business in South Africa.

42 Section 28 of the STIA and Section 29 of the LTIA.

43 Section 29 of the STIA and Sections 30 and 31 of the LTIA.

44 Section 33(1) of the STIA and Section 34(1) of the LTIA.

45 Section 33(2) of the STIA and Section 34(2) of the LTIA.

46 Section 3 of the PFA read with Sections 1 and 13 of the Financial Services Board Act (Act 97 of 1990). Certain South African pension funds have been established under their own statute and do not fall to be regulated by the FSB, and are not subject to the provisions of the PFA (unless the latter has been specifically incorporated by reference in the pension fund's constitutional framework).

47 So named since the requirements are contained in Regulation 28 of the Regulations to the PFA.

48 Final Regulation 28 Explanatory Memorandum, p. 7.

49 Regulation 28(2)(d).

50 Item 3.1 of Table 1 of Regulation 28.

51 Regulation 28(3)(f).

52 Regulation 28(9).

53 Regulation 28(4).

54 On 15 March 2012 the FSB published conditions for investment by pension funds in private equity funds under Notice No. 1 of 2012.

55 Regulation 28(5).

56 Act 24 of 1936.

57 The market practice in South Africa is to conclude securities lending transactions in terms of a global master securities lending agreement as published by the International Securities Lending Association, together with a South African schedule thereto as published by the South African Securities Lending Association.

58 Law of South Africa, 2nd ed., Vol. 19: 'Partnership' by JJ Henning, Paragraph 258; Joubert & Faris (editors).

59 National Treasury and the FSB, The Regulation of Hedge Funds in South Africa, 13 September 2012.

60 Act 57 of 1988.

61 Law of South Africa, 2nd ed., Vol. 31: 'Trusts' by MJ De Waal and others, Paragraph 545; Joubert & Faris (editors).

62 Notice No. 1 of 15 March 2012: Conditions for Investment in Private Equity Funds.

63 Act 23 of 2004.

64 Act 29 of 1999.

65 PIC Integrated Report 2012, p. 3.

66 Ibid, p. 9.

67 bid.

68 The interest withholding tax provisions have been inserted in the Income Tax Act (Act 58 of 1962) in terms of Act 7 of 2010, but are proposed to be deleted by the draft Taxation Laws Amendment Bill, 2013. Updated provisions are expected to be released in due course.

69 As per the proposed amendments contained in the draft Taxation Laws Amendment Bill, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.