SOUTH AFRICA: FINANCIAL SECTOR REFORMS AND INVESTMENT FUNDS
Following the global financial crisis South Africa has seen numerous financial sector regulatory reforms. The regulatory reforms with an impact on investment funds, and more specifically collective investment schemes and hedge funds, are:
General financial sector reforms.
White labelling of collective investment schemes.
Pension fund investment in hedge funds.
This article provides an overview of each of the reform initiatives.
GENERAL FINANCIAL SECTOR REFORMS
On 23 February 2011 the South African government, through the National Treasury, released a policy document (A safe financial sector to serve South Africa (policy document)) outlining reform initiatives for the financial sector.
In the policy document the National Treasury recognises that South Africa needs a stable financial services sector that is accessible to all to promote sustainable economic growth and development. The financial services sector includes collective investment schemes and hedge funds that are supervised by the Financial Services Board (FSB). The policy document outlines the reform proposals emphasising:
Financial stability.
Consumer protection.
Financial inclusion.
A major policy shift is a move towards different agencies being given lead responsibility for key policy objectives. The main proposal is to separate prudential and market conduct regulation. To achieve this, the South African Reserve Bank (SARB) will be given lead responsibility for prudential regulation. The FSB will be given lead responsibility for consumer protection. As part of this reform, the mandate of the FSB will be expanded to include the market conduct of retail banking services.
The market conduct of collective investment schemes (CIS) will be supervised by the FSB and their prudential limits by the SARB. The National Treasury will also encourage greater access to financial services through a number of initiatives. One of those initiatives, which has a direct impact on CIS relates to increasing competition in the provision of retirement benefits after retirement. Currently, there are two main types of retirement benefits available after retirement:
Living annuities.
Guaranteed annuities.