REGISTRATION OF HEDGE FUND MANAGERS UNDER COLLECTIVE INVESTMENT SCHEMES CONTROL ACT, 2002 REQUIRED BY 30 SEPTEMBER 2015: SUMMARY OF APPLICATION REQUIREMENTS AND PROCESS

By Francisco Khoza Thursday, July 16, 2015
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In order to continue operating, current Hedge Fund Managers in South Africa have until 30 September 2015 to lodge their applications with the Financial Services Board (FSB) in order to be registered as managers of collective investment schemes in hedge funds.

This comes after the Minister of Finance declared hedge funds to be collective investment schemes under the Collective Investment Schemes Control Act, 2002 (CISCA) on 25 February 2015. According to the FSB, as at 22 June 2015 no hedge funds have lodged registration applications.

Failure to register will constitute a contravention of CISCA and Hedge Fund Managers could be subject to enforcement action by the FSB.  This could include a fine of up to ZAR10 million or imprisonment for a period not exceeding 10 years, or both, and could jeopardise a fund’s continued operation.

How to register if you are a South African Hedge Fund Manager?

  • A current SA Hedge Fund Manager must apply to have the fund registered as a Qualified Investor Hedge Fund (QIHF) or a Retail Investor Hedge Fund (RIHF). The two types of hedge funds are regulated differently, with the RIHF regulated more strictly than the QIHF.
  • The hedge fund must also be legally structured either as a trust or an en commadite partnership.
  • The following documents must be lodged with the Registrar of Collective Investment Schemes (Registrar) at the office of the FSB (in both hard and soft copy) for consideration:
    • a Manager Application Form (form MA1);
    • a Personal Questionnaire to be completed by every director of the Hedge Fund Manager  (form PQ) as specified in form MA1;
    • depending on the legal structure,  one or a combination of form QCIS, form QECP, form RCIS, and form RECP;
    • depending on the service providers engaged, form SP;
    • a Scheme Deed (i.e. in the case of a trust structure,  the trust deed and in the case of a partnership structure, the partnership agreement); and
    • all Supporting Documents contemplated in the above forms,  such as: a tax clearance certificate; company registration documents; ID copies of directors; registration certificates/identity documents of company secretary; group structure diagram; ID copies of beneficial shareholders/ beneficiaries; staff organogram; audited financial statements; group audited financial statements; management accounts; business plans of the scheme; business plan of the manager;  sources of external finance; subordinated loan agreements; details of guarantees given; details of guarantees received; insurance and indemnity;  Financial Intelligence Centre Act 2001 compliance procedures; and a disaster recovery plan.

How to register if you are a foreign Hedge Fund Manager promoting, or wanting to promote, a hedge fund in SA?

  • The registration of a foreign hedge fund that is promoted, or to be promoted, in South Africa is governed by same process applicable to foreign collective investment schemes issued under Board Notice 257 of 2013 “Conditions in terms of which Foreign Collective Investment Schemes may Solicit Investments in the Republic”.
  • As with South African hedge funds, the manager of a foreign hedge fund, which is currently promoted in South Africa, must get the fund approved by the Registrar by no later than 30 September 2015.

Applicable Registration Fee

The application fee for registration as a Hedge Fund Manager is currently ZAR58 200.00 (including one portfolio), while the fee for approval of each additional portfolio is currently ZAR20 980.00. To access Board Notice 257 of 2013, the application forms and other necessary documents, please click here. For further queries or assistance with the registration of a hedge fund, please contact Francisco Khoza on f.khoza@bowman.co.za or (011) 669 9308.