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STANLIB fined R500 000 for CISCA non-compliance

Publish date: 11 January 2019
Issue Number: 53
Diary: CompliNEWS
Category: Enforcement

The Financial Services Conduct Authority (FSCA) has taken enforcement action against STANLIB for contravention of paragraph 1(i) of Schedule 1 to the Collective Investment Schemes Control Act 45 of 2002 (CISCA). STANLIB is a registered Manager in accordance with CISCA.

During an on-site visit conducted by FSCA’s predecessor, the Financial Services Board, it was found that STANLIB’s Minimum Disclosure Documents (MDDs) relating to the portfolios listed below disclosed the levying of a performance fee, whilst the supplemental deeds of the portfolios did not provide for such a fee to be charged:

  • STANLIB Multi-manager SA Equity Fund;
  • STANLIB Multi-manager Bond Fund;
  • STANLIB Multi-manager Balanced Fund;
  • STANLIB Multi-manager Defensive Balanced Fund;
  • STANLIB Multi-manager Real Return Fund; and
  • STANLIB Multi-manager Absolute Income Fund (the portfolios).

It is not permissible for a Manager to charge performance fees that are not stipulated and provided for in the supplemental deeds of the portfolios concerned.

Based on the above, STANLIB provided an enforceable undertaking to the FSCA as contemplated in section 151 of the Financial Sector Regulation Act 9 of 2017 (FSR Act) to:

  • repay the performance fees levied by STANLIB in respect of each of the affected portfolios for the period 1 January 2011 to 30 June 2018;
  • communicate with all the investors of the affected portfolios informing them of the details of the breach and the remedial action to be undertaken by STANLIB; and
  • review its internal control environment and take the necessary action to strengthen it to avoid an occurrence of this nature.

The FSCA imposed an administrative penalty in the amount of R500 000,00 on STANLIB for the contravention. Notwithstanding the penalty imposed, it should be noted that:

  • STANLIB accepted responsibility for the contravention;
  • STANLIB has been co-operative in its engagement with the FSCA in this matter as from the initial discovery of the contravention during the on-site inspection;
  • The performance fees that were charged, despite the contravention, were disclosed to investors in the MDDs which supports STANLIB’s submission that it was not its intention to mislead investors.

Copy of FSCA order

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By Lee Rossini

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