December 5, 2009
 By Bruce Cameron
The Financial Services Board (FSB) has for the first time used its recently established Enforcement Committee to punish two collective investment schemes (CISs) - one managing unit trust funds and the other managing exchange traded funds (ETFs).
The Enforcement Committee is an administrative justice structure outside the courts. The committee came into operation in November 2008 and was based on a committee that was initially set up to bring a halt to insider trading on the JSE.
The Enforcement Committee may impose administrative penalties, compensation orders and cost orders on respondents that are found to have contravened any law administered by the FSB.
The decision by the FSB to take the two CISs to the Enforcement Committee is part of a general tightening up of the regulation of CISs.
Recently, the FSB stopped issuing new licences to Metropolitan for what are known as white label or third party CIS funds, where a CIS management company in effect rents out its licence to other people or institutions that provide CIS funds.
This week, the financial ser-vices industry body, the Association for Savings & Investment South Africa (Asisa), held a meeting with the FSB following the regulator's "serious reservations about the practice of white- labelling and the rapid increase in third party funds".
Leon Campher, the Asisa chief executive, says the main aims of the meeting were to define the different models of white-labelling in use, to gain a common understanding of how they work and to identify the problem areas of each model.
The FSB will now consider the outcome of the meeting before discussing possible solutions with Asisa and the CIS industry.
The details of the two Enforcement Committee cases are:
NewFunds Pty Ltd (a joint venture of Absa Capital and Vunani Capital that manages a number of ETFs) was referred by the FSB to the Enforcement Committee, because NewFunds "failed to maintain sufficient liquid capital" as required by the Collective Investment Schemes Control Act (Cisca). The requirement is to ensure that a CIS can pay an investor as and when units are sold.
The FSB says that in levying a R20 000 fine, account was taken of the fact that NewFunds co-operated fully during the investigation and the enforcement action, that the contravention was a bona fide oversight, that no prejudice resulted from the contravention, and that NewFunds had not previously contravened Cisca.
Coris Capital Collective Investment Managers Limited (Coris Capital) was referred by the FSB to the Enforcement Committee, because it did not adhere to a 20-percent limit imposed in terms of Cisca on how much one unit trust fund may invest in another fund.
The contravention related to the investment of the Gryphon Dividend Income Fund, managed by Coris, in the Prudential Dividend Income Fund.
In levying a penalty of R10 000, the FSB says the Enforcement Committee took into account that Coris Capital co-operated fully during the investigation and the enforcement action, that the non-compliance was rectified, that no prejudice resulted from the contravention, and that Coris Capital had not previously contravened Cisca.
  
 
|
© 1999 - 2010 Personal Finance & Independent Online (Pty) Ltd. All rights reserved.