As financial markets become increasingly interconnected, fund managers worldwide seek efficient ways to access new investor bases. South Africa’s Collective Investment Schemes Control Act, 2002 (“CISCA”) offers a valuable gateway for global fund managers through its Section 65 provision. This section allows foreign collective investment schemes (“CIS”) to be marketed and distributed in South Africa, provided they meet the necessary regulatory standards.
For asset managers looking to expand into a growing and dynamic market, understanding Section 65’s requirements and strategic advantages is crucial.
Why section 65 is a key entry point for foreign funds
South Africa’s financial services sector is well-regulated and presents an attractive opportunity for foreign investment managers. Section 65 of CISCA enables international CIS to enter this market while ensuring investor protection and financial stability.
By leveraging Section 65, global fund managers benefit from:
- Market access: the ability to market funds directly to South African investors.
- Regulatory credibility: approval under Section 65 demonstrates compliance with South African financial regulations.
- Diverse investment opportunities: South Africa’s investment landscape is growing, with an increasing demand for offshore investment products.
Understanding the approval process and compliance requirements is essential to successfully navigating this regulatory framework.
Navigating the section 65 approval process
The Financial Sector Conduct Authority (“FSCA”) oversees the approval of foreign CIS under Section 65. The process involves:
- Application submission: the fund must provide detailed information about its structure, investment strategy, and compliance measures.
- Regulatory assessment: the FSCA evaluates the application to ensure it meets the necessary standards, including investor protection and risk management.
- Approval and registration: once the FSCA is satisfied, the fund is approved and registered, allowing it to be marketed in South Africa.
Foreign funds structured as UCITS, SICAVs, and other internationally recognised investment vehicles are more likely to gain approval, as they align with global regulatory standards.
Compliance and reporting requirements
To maintain compliance under Section 65, foreign CIS must adhere to key requirements, including:
- Investor protection: funds must have strong governance structures, segregated assets, and transparent reporting.
- Liquidity management: sufficient liquidity must be maintained to meet investor redemptions.
- Disclosure and reporting: regular financial statements, net asset value (NAV) updates, and risk disclosures must be provided to both regulators and investors.
- Tax transparency: funds must comply with international tax reporting standards, such as FATCA and CRS.
Adhering to these standards not only facilitates approval but also enhances investor confidence in foreign CIS offerings.
Selecting the right jurisdiction for section 65 approval
With over 900 foreign portfolios already approved under Section 65, the choice of jurisdiction plays a crucial role in a fund’s success. Popular domiciles include:
Ireland and Luxembourg: leading European fund centres with strong regulatory frameworks and high approval success rates.
- Guernsey and Jersey: well-established offshore jurisdictions offering cost-effective regulatory compliance.
- Mauritius: a gateway for investments into Africa and Asia, offering tax-efficient structures.
- When selecting a jurisdiction, fund managers should consider regulatory alignment with CISCA, cost efficiency, and the probability of approval.
How can we help?
Navigating Section 65 compliance requires a deep understanding of South African regulatory requirements. We provide comprehensive fund administration and regulatory support services across multiple jurisdictions. Our expertise in regulatory reporting, risk management, and fund distribution ensures a seamless approval process under Section 65.
Download the full white paper
For a detailed guide on leveraging Section 65 of CISCA for market expansion, download our exclusive white paper. Gain insights into regulatory requirements, approval processes, and strategic jurisdiction selection to enhance your fund’s global reach.
Fill out the form below to download the white paper.
