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"ACTS"
All of these acts are available for a full perusal on: www.fsb.co.za.
Herewith an overview.
FAIS (Financial Advisory and Intermediary Services) Act:
This follows on the back of legislation that was introduced in the UK about
3 years ago, and is there to protect the investor against unscrupulous
individuals offering bad advice. In essence, to be able to market an investment
product you now need to be registered with the FSB, which ensures that you have
the correct knowledge to promote that product. In addition, one has to have full
disclosure on all fees etc. Should an advisor not comply with any of this, you
have recourse against them – something that was not clear in the past. This
should effectively weed out the undesirables, and hopefully leave the ethical.
There was a massive drop off in the UK after they introduced their act.
Brantam have been registered with the FSB for
over 7 years now.
FICA (Financial Intelligence Centre Act):
FICA tends to concentrate more on the disclosure of the
source of funds etc., and has come about due to increased terrorist
activity plus to control the flow of funds offshore. In essence, we,
as the advisor, cannot accept funds in hard cash unless the investor
can proof the source of those funds. In addition, we cannot accept
investments if we do not “know” the investor – i.e. he must be able
to prove where he lives; that he is secure; that he is clean with
SARS and generally that he is a good guy. Any contravention of the
above can land us in jail for up to 15 years or a R 10 million fine
!
COLLECTIVE INVESTMENT SCHEMES ACT:
This
is the latest one, and is directly applicable to the unit trust
industry. Key features are:
-
In the past, unit trusts were sold with a buy / sell price, the
difference between the two (normally around 6%) was the fees, brokers
commission, trustees fees, bank charges etc. from 1st of March, some of
these fees will be paid out of the fund and disclosed on your statement,
with a single fund price being quoted. You will thus have a clearer picture
of how well the fund is doing;
-
An increase in fund management flexibility. In the past, a unit trust
could only have a maximum exposure of 5% to any one share, and up to 10% if
that share had a market capitalization of R 2bn or more. This has been
increased to allow fund managers to hold a greater number of shares in
companies that constitute more than 10% of the JSE Index;
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No cash minimums required – in past, a minimum of 5% had to be held
in cash at all times. This has been relaxed and a fund manager can now
invest fully if he so wishes;
-
Foreign exposure in Money Markets has been
increased and a manager can now go up to 30% of his fund in a
Money Market instrument issued by the local branch of a foreign
bank. This was formerly restricted to 3%.
We should see the various unit trust managers exploring these possibilities
in the near future.
LIVING ANNUITIES:
Up to now, if you had
an investment in a Living Annuity with say Old Mutual, you were
stuck there, even if you wanted to move. This has been relaxed, and
you may now switch your funds to another company if you are
dissatisfied with the service you are receiving. A major move in the
management of funds, and one that is welcomed.
Despite the claims of a certain financial journalist, this move came about
from the pressure exerted by a group of financial advisors (us included) on
the FSB over the past 12 months.
So, the times they are a changing, and the investment markets are looking more
and more exciting.
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