The Financial Sector Conduct Authority (FSCA) recently published FSCA FAIS Notice 54 of 2021, which extends several exemptions relating to Private Equity Funds. The exemptions which are already in place and were set to expire on 30 June 2021, have now been extended until 30 June 2023.
1. Exemption of certain persons conducting financial services related business with private equity funds
Category II FSPs that render financial services to a private equity fund are exempt from section 5(1)(c) and 5(1)(j) of the Code of Conduct for Discretionary FSPs and section 48(2) and 48(3) of the Determination of Fit and Proper Requirements. These sections relate to some of the requirements in respect of a discretionary investment mandate and certain of the financial soundness requirements, in particular:
- Mandates
Any mandate that was entered into before 13 December 2012 does not have to contain a general statement pertaining to risks associated with investing in local and foreign financial products, with particular reference to any currency risks – as long as these investors were informed in writing, of these risks within six months of the publication of Board Notice 208 of 2012 (i.e. 13 June 2013). Although this exemption is still active, it only affects older mandates that were concluded before this date.
Any mandate that was concluded before 13 December 2012 is exempt from the requirement that the mandate must make provision for either party to the mandate to terminate the mandate after giving notice in writing of not more than 60 calendar days. Although this exemption is still active, it only affects older mandates that were concluded before this date.
Any mandate entered into after 13 December 2012 is exempt from the provision requiring a mandate to be able to be terminated upon 60 calendar days written notice, provided that clients, who in the aggregate have committed 75% of capital to the private equity fund, have the right to terminate the mandate for any reason whatsoever, after notice in writing of not more than 180 days.
- Financial Soundness
A Category II FSP is exempt from meeting the liquidity requirement set out in the Determination of Fit and Proper Requirements of section 48(2) until 30 June 2023, provided it only manages private equity funds. In addition, the Category II FSP does not have to submit the Liquidity Calculation Declaration (Form A of Annexure six of Board Notice 194 of 2017) to the FSCA whilst this exemption applies.
Any Category II FSP that wishes to rely on the abovementioned exemptions, must register the exemption with the FSCA in the prescribed format and is required to notify the FSCA in writing, if there are any changes to the information that was submitted when registering the exemption, within 15 days after the change has taken place.
2. Exemption of certain FSPs conducting financial services related business with private equity funds from Section 13(1)(c) of the FAIS Act
Category II FSPs that render financial services to a private equity fund are exempt from section 13(1)(c) of the FAIS Act, which provides that a person may not render financial services or contract in respect of financial services, other than in the name of the FSP of which such person is a representative. The expiry date of this exemption has been extended to 30 June 2023.
An FSP that wishes to rely on this exemption, must register the exemption with the FSCA and must inform the FSCA if there are any changes to the information submitted, within 15 days after the change has taken place.
3. Exemption of certain Juristic Representatives from Liquidity Requirements
Juristic representatives of a Category II FSP that only renders financial services to private equity funds are exempt from meeting the liquidity requirements as set out in sections 48(2) and 48(4) of the Determination of Fit and Proper Requirements, until 30 June 2023. In addition, these juristic representatives do not have to submit the Liquidity Calculation Declaration (Form A of Annexure six of Board Notice 194 of 2017) to their FSPs whilst this exemption applies.
This exemption is subject to the juristic representative not becoming the subject of a decision, order or directive where the juristic representative is debarred, an administrative penalty is imposed on it or where it is removed from a specified position or function in or in relation to a financial institution. If this condition is not met, the exemption will no longer apply to that juristic representative.