Keep up to date on key Financial Services Regulation developments in South Africa during February 2023.
Publication of the Financial Sector and Deposit Insurance Levies Act 11 of 2022
This Act was signed and assented to by the President on 6 December 2022 and gazetted on 9 December 2022. The commencement date will be proclaimed in a gazette.
This Act aims to:
- Provide for the imposition of the deposit insurance levy;
- Provide for the imposition of financial sector levies on supervised entities;
- Provide for exemption from the aforementioned levies under delineated circumstances;
- Provide for the apportionment of levies imposed on financial sector entities; and
- Provide for all incidental matters.
Publication of the Financial Sector and Deposit Insurance Levies (Administration) and Deposit Insurance Premiums Act 12 of 2022
This Act was signed and assented to by the President on 6 December 2022 and gazetted on 9 December 2022. The commencement date will be proclaimed in a gazette.
This Act aims to:
- Amend the Pension Funds Act, 1956, the Banks Act, 1990, the Mutual Banks Act, 1993, and the Financial Advisory and Intermediary Services Act, 2002, to align them with the Financial Sector Regulation Act, 2017, in relation to financing financial sector entities;
- Amend the Financial Sector Regulation Act, 2017, to provide for the administration of levies imposed in terms of the Financial Sector and Deposit Insurance Levies Act, 2022;
- Provide for the imposition, collection and administration of deposit insurance premiums;
- Provide for the collection and administration of levies imposed pursuant to the Financial Sector and Deposit Insurance Levies Act, 2022; and
- Provide for incidental matters.
Financial Intelligence Centre (FIC) published 29 amendments to the Targeted Financial Sanctions list
On 6 February 2023, the FIC added additional entities to the Targeted Financial Sanctions list. The list can be accessed here.
Guidance Notice 1 of 2023 (RF) - Application of section 14(7) of the Pension Funds Act, 1956
On 20 February 2023 the Financial Sector Conduct Authority (FSCA) published the final version of a guidance notice on how intermediaries may be remunerated when a member’s interest is transferred from one retirement annuity (RA) fund to another.
Publication follows the consultation process that closed in August 2022 on the draft notice. The FSCA received 60 comments from eight industry stakeholders.
The main objective of Guidance Notice 1 of 2023 (RF) (Guidance Notice) is to ensure a consistent interpretation and application of section 14(7) of the Pension Funds Act, 1956 (PFA) and other intermediary remuneration provisions in the Regulations to the Long-term Insurance Act (LTIA) and the General Code of Conduct.
Key Aspects of the Guidance Notice:
- When applying section 14(7)(b)(ii) of the PFA, sub-sections 3A(1)(a)(iv) and 3A(1)(d) of the General Code of Conduct must be applied together with the provisions of the PFA.
- Any fees and commissions for financial services rendered after the transfer of interests that exceed the maximum allowed in the LTIA Regulations must meet the requirements of sub-section 14(7)(b)(ii)(bb) of the PFA.
- The PFA, as primary legislation, prevails over the LTIA Regulations where there is inconsistency in the remuneration payable when an interest is transferred from one underwritten RA fund to another.
The Guidance Notice, a communication document and a full consultation report are available on the FSCA’s website.
Government Gazette 48104 – Penalty for Failure to Furnish Authority with Returns in terms of section 66(1)(b) of the Short-Term Insurance Act
The FSCA has determined the new penalty amount in accordance with section 66(1)(b) of the Short-Term Insurance Act, 53 of 1998 (STIA) for failure to furnish the FSCA with returns, information or a document as provided for in the STIA in terms of section 66(1)(a). The penalty will be ZAR 7,750.00. These adjustments are done annually to reflect the Consumer Price Index published by Statistics South Africa.
The notice came into operation on 24 February 2023, the date of its publication in the Government Gazette.
Government Gazette 48104 – Penalty for Failure to Furnish Authority with Returns in terms of section 68(1)(b) of the Long-Term Insurance Act
The FSCA has determined the new penalty amount in accordance with section 68(1)(b) of the Long-Term Insurance Act, 52 of 1998 (LTIA) for failure to furnish the FSCA with returns, information or a document as provided for in the LTIA in terms of section 68(1)(a). The penalty will be ZAR 7,750.00. These adjustments are done annually to reflect the Consumer Price Index published by Statistics South Africa.
The notice came into operation on 24 February 2023, the date of its publication in the Government Gazette.
FSCA Collective Investment Scheme Notice 1 of 2023 – Exemption of collective investment scheme managers from certain requirements of Section 99(1) of the Collective Investment Schemes Control Act, 2002
On 8 February 2023, the FSCA published a notice exempting collective investment scheme (CIS) managers from certain requirements of section 99(1) of the Collective Investment Schemes Control Act, 2002 (Exemption Notice).
A "targeted portfolio" is defined as:
"in the context of an amalgamation of two or more collective investment schemes or two or more portfolios, means the collective investment scheme or portfolio to which another collective investment scheme or portfolio is intended to be transferred"; and
a "transferring portfolio" is defined as:
"in the context of an amalgamation of two or more collective investment schemes or two or more portfolios, means the collective investment scheme or portfolio that will be transferred to another collective investment scheme or portfolio."
The notice exempts a manager from obtaining the prior consent of investors in a targeted portfolio when amalgamating two or more CISs or two or more portfolios of a CIS, subject to the following conditions:
- at the same time that investors in a transferring portfolio are informed of a ballot for an amalgamation, the manager must warn them about the proposed amalgamation, so that they may consider their options and have an opportunity to exercise their rights before the transfer is concluded;
- the warning must be transparent, in writing and provide appropriate and accurate information to the targeted portfolio's investors about the expected impact of the amalgamation, to enable them to make an informed decision on the exercise of their rights;
- if investors holding a majority in value of participatory interests in the targeted portfolio object to the proposed amalgamation after the manager’s warning, the manager:
- may not proceed with the amalgamation; and
- must inform the FSCA of the objection;
- assets that are transferred as part of the amalgamation must be of similar type, quality and liquidity as the assets in the CIS or portfolio receiving the transferred assets. Alternatively, assets in liquid form must be transferred and re-invested, within one month of the amalgamation, into the targeted fund;
- the manager of the targeted portfolio must develop a plan to deal with any illiquid assets, including making any necessary disclosures, and must ensure that in implementing the plan the fair treatment of investors is prioritized, not compromised; and
- trustees of the targeted portfolio must agree that the receipt of assets held in the targeted portfolio as a result of the amalgamation is not likely to result in any material prejudice to the interests of those investors. They must agree that such receipt is consistent with the objective of the targeted portfolio and can be effected without any breach of the investment limits or the investment policy, subject to subparagraph 3(1)(b)(ii) of Board Notice 90 of 2014 in Government Gazette No.37895 on 8 August 2014, including the limit on borrowing powers.
The Exemption Notice came into effect on 8 February 2023, the date of publication.
