The FSCA recently published a Press Release regarding the fine that it imposed on MET Collective Investments (Pty) Ltd (METCI). The administrative penalty of R100 million was a result of METCI contravening various sections of financial sector laws including section 4 of the Collective Investments Schemes Control Act (CISCA) and Board Notice 90 and 92.
METCI was under investigation, by the FSCA, after one of its unit trust funds lost approximately 66% of its value during 8 to 11 December 2015. As a result of the investigation the FSCA found that METCI did not have proper risk management processes in place to manage and exercise proper control, oversight and governance over the fund. It was also found that METCI breached exposure limits as well as published misleading statements in certain minimum disclosure documents.
In the Order the Commissioner emphasises the statutory objective that CIS managers need to exercise proper oversight and that they must take responsibility for regulatory compliance. While CISCA permits a CIS manager to delegate the investment management of a CIS portfolio to a third party such as a Category II Financial Services Provider, the legislation is unambiguously clear that anything that is done or not done by that delegated person, must be regarded as having been done by the CIS manager. Therefore, ultimately the CIS manager will be held accountable for the actions taken by an investment manager, or any other person, to whom it has delegated certain functions, highlighting the importance of a robust risk management system.
To read the full Order, click here.