EXEMPTION OF CIS MANAGERS FROM CERTAIN REQUIREMENTS FOR THE MANAGEMENT OF PORTFOLIOS, 2020
The spread of the novel Coronavirus has drastically impacted the South African economy, resulting in serious volatility in the domestic bond market and listed property markets which in turn has impacted the liquidity in certain portfolios.
Internationally, the suspension of the creation, issue, sale and repurchase of participatory interests is a tool that is accepted to manage exceptional liquidity risk or stressed market conditions.
Due to the prevailing circumstances, the FSCA has issued an exemption to CIS managers from complying with the requirements contained in its deed in accordance with Items 1(c), 1(e) and 2(a) of Schedule 1 of the Collective Investment Schemes Control Act relating to the creation, issue, sale and repurchase of participatory interests in a portfolio.
Pursuant to the exemption, a manager may temporarily suspend the creation, issue, sale and repurchase of participatory interests in a portfolio if due to the exceptional prevailing circumstances it is in the interest of the investors in that portfolio.
The above exemption is subject to the following conditions:
Prior consent of the trustee/custodian must be obtained;
The Authority must be informed of the reason for the suspension and the consent of the trustee/custodian;
The suspension may only continue for as long as it is necessary to protect the interest of investors in the portfolio. The suspension must be lifted as soon as practicable to do so.
Investors of the portfolio must be notified of the suspension and provided an opportunity to withdraw the repurchase instruction;
Investors must be kept informed of the details, expected duration and other relevant information relating to the suspension;
A manager must continue to perform valuation and pricing as far as it is reasonably and practically possible;
A manager is not precluded from entering arrangements to continue meeting standing income demands, including but not limited to annuity requirements, as and when reasonably and practically possible with sufficient available liquidity;
The manager and the trustee/custodian must review the suspension at least every 48 hours;
A manager must inform the Authority and the trustee/custodian of the lifting of the suspension and immediately after the lifting must confirm this in writing to the Authority.