COVID-19: EXPECTATIONS OF MANAGERS OF COLLECTIVE INVESTMENT SCHEMES, SOUTH AFRICA
The Financial Sector Conduct Authority (FSCA) published ‘FSCA Communication 23 of 2020 (CIS)’ (Communication) on 22 April 2020, acknowledging the impact of the COVID-19 global pandemic on collective investment schemes and their investors.
The Communication outlines the FSCA’s key expectations regarding the duties of managers of collective investment schemes and their responsibility to ensure that all investors are treated fairly during the national lockdown.
In relation to portfolio risk limits, the FSCA notes that certain managers may be experiencing difficulties around ensuring compliance with the prescribed requirements, especially those managers making use of the value-at-risk (VaR) methodology. The FSCA expects managers who experience VaR breaches during this volatile period (among other actions) to notify the FSCA of the breach, to provide specific breach reports when available, and to have appropriate remediation action plans in place (see section 2).
In relation to portfolio review applications, the FSCA notes the difficulty that some managers are experiencing in obtaining physical signatures on their supplemental deeds and other application documents. The FSCA is accordingly willing to accept electronic signatures on these documents, subject to certain conditions (see section 3).
In relation to liquidity risk management, the FSCA is aware of the recent market volatility and its effect on overall portfolio liquidity. While managers are expected to apply various liquidity risk management strategies to respond to the risks identified during this time, the FSCA should be informed immediately when managers experience liquidity constraints related to increased repurchase requests (see section 4).
In relation to communication with investors, the FSCA understands that there may be variations in the forms of communication used during this time. Managers must ensure that all forms of investor communication are properly monitored and that the necessary security measures are in place to ensure the protection of investor information and of the business at large. Managers are also encouraged to actively communicate with investors and to resolve complaints timeously (see section 5).