Management of Investments PDF

Management of investments ------------------------- ### Authority to manage investments in IRC securities All trading members are authorised to manage investments comprising IRC securities provided that they comply with the provisions of this rule, and all other applicable rules, and undertake suc...

Management of investments ------------------------- ### Authority to manage investments in IRC securities All trading members are authorised to manage investments comprising IRC securities provided that they comply with the provisions of this rule, and all other applicable rules, and undertake such management in compliance with the client agreement. This rule shall, however, not apply to a trading member if the trading member is a bank or if the majority of such trading member's intermediary services do not relate to trading in JSE listed securities as an authorised user of any of the JSE markets. Such a trading member shall be required to obtain a licence to operate as a financial services provider in terms of the FAIS Act in respect of any advice or intermediary services which it provides to clients relating to IRC securities, and the relevant provisions of that Act shall apply to such advice or intermediary services. ### Trading as an investment manager in IRC securities - A trading member may not trade as an investment manager in IRC securities for or on behalf of a client unless it has concluded a discretionary client agreement with the client and the client has been registered with the JSE as a client of that trading member. - An investment manager may not directly or indirectly buy or sell IRC securities for or from his own account or any account in which an employee has a direct or indirect beneficial interest, to or from a client. ### Management and investment advice in respect of JSE authorised investments other than IRC securities - This rule is only applicable to trading members whose investment management activities in relation to IRC securities are regulated by the JSE. - The provisions of rules shall not apply to a trading member if the trading member is a bank or if the majority of such trading member's intermediary services do not relate to trading in JSE listed securities as an authorised user of any of the JSE markets. Such a trading member shall be required to obtain a licence to operate as a financial services provider in terms of the FAIS Act in respect of any advice or intermediary services which it provides to clients relating to JSE authorised investments other than IRC securities and the relevant provisions of that Act shall apply to such advice or intermediary services. - The provisions of the rules shall not apply to a trading member in respect of transactions in JSE authorised investments other than IRC securities where such transactions relate to securities listed on an exchange other than the JSE, and where such transactions are conducted as an authorised user of such exchange. Such transactions will instead be subject to the rules of the relevant exchange. - A trading member may not enter into transactions as an investment manager in JSE authorised investments other than IRC securities on behalf of clients or provide investment advice to any clients in respect of such investments unless it has notified the Director: Market Regulation, in writing, of its intention to effect such transactions or provide such investment advice. - In order for the JSE to identify the scope of an investment manager's activities in JSE authorised investments other than IRC securities, the written notification to the Director: Market Regulation shall indicate which specific investments the investment manager is intending either to transact in on behalf of its clients or to provide investment advice on, or both. - The details which are required to be submitted to the Director: Market Regulation shall specify the particular types of JSE authorised investments other than IRC securities in which activity is to be conducted but need not include the name of the particular investments. - The failure by an investment manager to provide the notification prior to undertaking the relevant activity may result in the JSE imposing restrictions or a prohibition on the investment manager's activities in JSE authorised investments other than IRC securities. - If an investment manager has previously notified the Director: Market Regulation of its intention to conduct activity in any JSE authorised investments other than IRC securities and the investment manager ceases to conduct activity in respect of one or more particular types of investments, with no intention of resuming activity in such investments in the foreseeable future, the investment manager shall notify the Director: Market Regulation forthwith, in writing, of such cessation of activity. - Any decision by an investment manager to invest in JSE authorised investments other than IRC securities on behalf of a client shall be made with due regard to the relevant provisions regarding the conduct of trading members, particularly the provisions relating to the general conduct towards clients and the exercise of discretion. - An investment manager shall not effect transactions in JSE authorised investments other than IRC securities on behalf of a client unless the client has given his general consent to such transactions being effected in a written mandate. - Every investment manager who purchases JSE authorised investments other than IRC securities on behalf of a client and who is accountable to the client for the client's investment in such instruments shall comply with the following requirements -- - the relevant investments shall be segregated from the investment manager's own assets at all times. If the JSE authorised investments other than IRC securities are held in an account maintained by another financial services provider, the account shall either be opened in the client's own name or, if the investment manager opens a single account in respect of transactions executed on behalf of more than one client, the investment manager shall procure that the account is clearly designated in the records of the relevant financial services provider as being an account utilised for investments made by the investment manager on behalf of its clients; - the investment manager shall maintain proper accounting records in respect of all JSE authorised investments other than IRC securities purchased or sold on behalf of clients. These records shall be updated forthwith in respect of any transactions in JSE authorised investments other than IRC securities and shall clearly identify the beneficial owners of all such investments at all times; and - the investment manager must balance its clients' holdings in JSE authorised investments other than IRC securities, as reflected in the investment manager's records, with the accounts maintained by the other financial services providers who hold such investments, on a monthly basis. Any differences identified between the respective records must be rectified forthwith. - Every investment manager who holds JSE authorised investments other than IRC securities on behalf of a client or who is accountable to a client for such investments shall implement and maintain an effective system of internal controls to safeguard such investments and prevent unauthorised access thereto. - Transactions by an investment manager in JSE authorised investments other than IRC securities which constitute foreign investments. ### Management of Foreign Investments For the purpose of this rule, foreign investments mean -- - securities listed on an external exchange; - units or any other form of participation in a foreign collective investment scheme approved by the Registrar of Collective Investment Schemes in terms of section 65 of the Collective Investment Schemes Control Act, 2002; - units or any other form of participation in a collective investment scheme licensed or registered in a foreign country; and - foreign funds intended for the purchase of such securities, units, or participation. An investment manager shall not enter into transactions in foreign investments on behalf of a client unless- - the mandate entered into between the investment manager and the client -- - stipulates that the investment manager is authorised to invest in foreign investments; - contains a statement pertaining to the risks associated with foreign investments, with particular reference to any currency risk; - states whether there are any jurisdiction restrictions in respect of the particular foreign investments; and - contains full particulars of the manner in which such investments shall be made and in whose name such investments shall be held or registered; - the client has obtained the prescribed tax clearance certificate from the South African Revenue Service (SARS). - An investment manager must, on request by a client, furnish the client with the following information regarding any foreign investments made by the investment manager on behalf of the client -- - the name of the licensed external exchange on which the foreign investments are listed, if applicable; - the country in which the foreign investments are licensed or registered and the name and address of the relevant licensing or registration authority, if applicable; - the name and address of the foreign financial services provider used by the investment manager to purchase or hold the foreign investments, if applicable; and - the name and address of the regulator of the foreign financial services provider rand whether such foreign financial services provider is approved or registered by such regulator. ### Trading with a discretionary financial services provider A trading member shall not effect a transaction with a person whom the trading member reasonably believes requires authorisation as a discretionary financial services provider or the status of a representative in terms of the FAIS Act, without having taken reasonable measures to ascertain that such person has the required authorisation or status. ### Conducting business with a nominee A trading member may not operate a client account on behalf of a person whom the trading member believes, or suspects requires approval to act as a nominee under section 76 of the Act without having taken reasonable measures to ascertain that such person has the necessary approval.108 ### Client statements An investment manager must provide a written statement to a client on a monthly basis which complies with the rules. A client statement must contain such information as is reasonably necessary to enable the client to -- - produce a set of financial statements; - determine the composition of the investments comprising the portfolio held by the trading member or for which the trading member is accountable to the client and the changes thereto over the reporting period, if applicable; and - determine the market value of the investments comprising the portfolio held by the trading member or for which the trading member is accountable to the client and the changes therein over the reporting period, if applicable. Pursuant to compliance with rules of clients statements, and to provide the client with the information necessary for them to review the operation of their account and make appropriate investment decisions, a client statement must contain at least the following information - - the quantity, description and market value of each investment comprising the portfolio held by the trading member or for which the trading member is accountable to the client, at the reporting date; - the amount of funds held by the trading member, or which has been invested by the trading member on behalf of the client and for which the trading member is accountable to the client, at the reporting date; - if any of the investments or funds are reflected in a foreign currency, the relevant currency exchange rate at the reporting date must also be reflected; - investments purchased or sold during the reporting period; - receipts and payments of funds during the reporting period; - details of income earned, and expenditure incurred during the reporting period; - non-cash transactions during the reporting period, including non-cash components of corporate actions and option expiries; - investments transferred into and out of the portfolio during the reporting period; - identification of those investments which at the reporting date were loaned to any third party but for which the trading member is still accountable to the client; - the quantity, description and market value of any financial products, or the amount of funds, held as collateral by the trading member on behalf of the client in respect of any loans made by the client; - identification of those investments or funds which at the reporting date were utilised to secure loans to the client or borrowings made on behalf of the client; - identification of those investments or funds which at the reporting date were utilised as margin in respect of open positions in any financial product; - in respect of investments in derivative instruments, a description of the underlying financial product, index, commodity or thing, the expiry month and in the case of options, the exercise or strike price; and - if the statement reflects any investments or funds which are not held by the trading member and for which the trading member is not accountable to the client, it should clearly indicate that fact in relation to such investments or funds. The information may be provided to the client in separate statements either during the reporting period or as at the reporting date. A client statement shall be provided either to the client or to an agent or third party nominated by the client in writing. ### Exercising of discretion and provision of investment advice by employees A trading member shall, in the course of its business, exercise discretion in the management of JSE authorised investments and provide investment advice to its clients on the buying and selling of JSE authorised investments only through an employee who has obtained such qualification as may be prescribed in the directives.