Major blow for SA offshore investors: FSCA puts new ETF excon regs on hold – statement

It caused plenty of excitement when it was announced about a month ago, but the regulations surrounding the reclassification of inward listed instruments have been ‘suspended with immediate effect’. In an interview with BizNews founder Alec Hogg (listen below), Magda Wierzycka and Magnus Heystek outlined the benefits the new regulation would bring to many South Africans by facilitating an increase in offshore diversification through domestic Exchange Traded Funds. But, Heystek warned at the BizNews Finance Friday webinar that there was a battle going on behind-the-scenes as the easing of exchange controls would negatively impact on businesses competing with ETF providers. – Jarryd Neves

Capital flow management framework update: Clarification of reclassification of inward listed instruments

National Treasury, South African Reserve Bank and Financial Sector Conduct Authority Media Statement:

National Treasury, the South African Reserve Bank (SARB) and the Financial Sector Conduct Authority (FSCA) intend to review Exchange Control Circular 15/2020 issued by the SARB, following the announcement by the Minister of Finance in the Medium Term Budget Policy Statement (MTBPS) Speech on 28 October 2020. 

The review is limited to providing clarification on the scope of changes to the announcement related to the reclassification of inward listed instruments. This follows enquiries by various stakeholders having different interpretations on the extent that the Circular affects the foreign investment limits applicable to institutional investors, inter alia, retirement funds, collective investment schemes and insurers. 

The MTBPS announcement aims to create an enabling environment that makes it easier for foreign investors to invest in South Africa, and support South Africa’s growth as an investment and financial hub for Africa. The National Treasury would like to emphasize that the announced reforms to the capital flow management framework do not alter the prudential framework currently applicable to all regulated funds, including retirement funds, collective investment schemes and insurance. 

The Circular issued on 29 October 2020 dealing with the reclassification of inward listed instruments is therefore suspended with immediate effect, to reduce the scope for ambiguity related to compliance with the prudential framework for regulated funds. An amended Circular will be issued following a period of public consultations. All approvals granted on the basis of Circular 15/2020 are also suspended. The dispensation before Circular 15/2020 remains extant. 

Stakeholders and the public are invited to submit comments to [email protected] by 15 December 2020 on proposals to amend the Circular in question. Input is also required on the selling of a derivative or ETF where the underlying foreign asset is issued by a company not listed on a South African exchange. 

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