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FSB AGREEMENT WITH THE EUROPEAN UNION OPENS DOORS FOR SOUTH AFRICAN FUND MANAGERS

South African fund managers will now be able to market their alternative investment products in European Union countries. This follows the signing of the long-awaited memoranda of understanding (MoUs) between the Financial Services Board (FSB) and 25 European Union Jurisdictions. The MoUs cover Alternative Investment Management Directive (AIFMD) entities that offer investment products such as hedge funds and private equity funds. The aim of the MoUs is to foster cross border consultation, cooperation and the exchange of information related to the supervision of these entities. This extends to mutual assistance in the supervision and oversight of managers of alternative funds, their delegates (to which functions are outsourced) and depositaries operating on a cross-border basis in the jurisdictions of the signatories. The signing of the MoUs was preceded by extensive negotiations between the FSB (in consultation with National Treasury) and the relevant jurisdictions, through the Office of the European Securities and Markets Authority (ESMA).

It is envisaged that the MoUs will greatly assist regulatory authorities in achieving their objectives of investor protection, fostering market and financial integrity, and maintaining confidence and systemic stability. The move is also in line with the G20 recommendation and IOSCO (International Organization of Securities Commissions) principles aimed at promoting cross-border cooperation, assistance and the exchange of supervisory information between member jurisdictions.

The MoUs were concluded in accordance with the Financial Services Board Act, which permits disclosure of information obtained in performance of any act/power in terms of the Acts administered by the FSB. To afford the necessary protection to the information exchanged in terms of the MoUs, provision has been made to ensure that the use of the information is restricted to achieving the supervisory and regulatory objectives of the regulators and that confidentiality is maintained at all times.

The conclusion of the MoUs comes at an opportune time, when the FSB is in the process of developing South Africa’s regulatory framework for alternative investments. A draft framework document has been prepared and circulated for comment. The FSB is currently in the process of reviewing the comments received. It is envisaged that the framework will come into effect in the latter part of 2014.