Page 82 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 5 Legislation and guidelines

These conduct standards have binding legal effect and increasingly serve as the primary
mechanism through which market conduct regulation is implemented.
Conduct standards applicable to collective investment schemes address, among other matters:
R The calculation and disclosure of net asset value (NAV) and pricing methodologies.
R The delegation and outsourcing of administrative and investment functions.
R Governance, risk management, compliance, and internal control requirements for CIS
managers.
R The identification, avoidance, and management of conflicts of interest.
R Portfolio design, approval, monitoring, and distribution practices.
R Disclosure requirements, including prospectus content and investor communication.
These standards are enforceable and form part of the regulatory obligations of CIS managers
alongside CISCA, FAIS Act (while in force), and FICA. Industry participants are expected to monitor
the publication of new and amended conduct standards on an ongoing basis.

The twin peaks regulatory framework
The Financial Sector Regulation (FSR) Act introduced what is referred to as the “twin peaks”
regulatory model because it seperates prudential supervision, the regulation of the soundness of
the financial markets, from market-conduct regulation, the protection of consumers of financial
services. The “twin peaks” model reflects international best practice and recognises that financial
stability and consumer protection require different regulatory approaches.
The FSR Act became effective in March 2018 and established:
Under the Twin Peaks framework:
R The Prudential Authority, housed within the South African Reserve Bank, which is responsible
for the financial soundness and stability of prudentially regulated institutions, particularly
banks and insurers.
R The Financial Sector Conduct Authority (FSCA), which replaced the Financial Services
Board (FSB), and is responsible for regulating the conduct of financial institutions, protecting
financial customers and promoting fair treatment and market integrity.
The FSR Act also establishes the Financial System Council of Regulators which will coordinate
the activities of the two new authorities and other regulatory bodies (such as the National Credit
Regulator, the Council for Medical Schemes, the Competition Commission and the National
Consumer Commission).
This coordination will improve regulatory cooperation, previously shared, and that which continues
to be shared, by the SARB, FSCA, the National Credit Regulator and the Council for Medical
Schemes. The proposed Council is a response to criticism that these bodies often work separately
and do not pay sufficient attention to the activities and objectives of their regulatory counterparts.
As part of ongoing implementation, financial institutions will be divided into two categories
depending on whether they carry out “mono-regulated” or “dual-regulated” activities. The latter –
those institutions that represent greater risk to both consumers and the broader financial system
– will have to be licensed by both the prudential and market conduct authorities in order to operate.
These include banks, long-term insurers, short-term insurers, securities exchanges and the
national payment system. Businesses that will only be regulated by the market conduct authority
include asset managers, retirement funds, collective investment schemes, financial advisers and
rating agencies.
The first phase of implementing the FSR Act was establishing the two authorities. During the
second phase the new authorities are publishing regulatory strategies setting out the changes
required to existing legislation, regulation and board notices.
The Prudential Authority was expected to take over some supervisory functions related to
collective investment schemes from the FSCA in March 2026, but this deadline is now expected to
be extended.

80 Profile’s Unit Trusts & Collective Investments March 2026