The Case For Unit Trusts Structure & Mandates Regulatory Bodies Tax on Unit Trusts Pricing and Multiple Classes Indices and Benchmarks

Unit Trusts In A Nutshell

Fund Classification Equity Asset Allocation Fixed Interest Real Estate Index Funds and Funds of Funds

Financial Services Board

The Financial Services Board is a quasi-government body funded by the financial services industry. It is the regulatory body of the unit trust industry - the CEO of the FSB is the Registrar of Unit Trusts. Their website address is www.fsb.co.za.

All unit trust companies are required to send details of their portfolios to the FSB every three months, as well as an annual report. The purpose of this monitoring is to check that management companies are not falsifying their performance and that fund managers are investing within their mandates, and that liquidity is not too high for long periods of time. Management companies are therefore accountable to their investors, their trustees and the FSB.

All other Financial Services Providers are required to submit annual financila statements to the FSB, as well as a number of reports detailing their compliance with the relevant statutes.

In the last two years 3 significant new Acts have been passed which consolidate statutory and legal requirements across the financial services sector, and which extend the FSB's regulatory powers to many investment 'schemes' that previously escaped the regulatory net. Namely:

• FAIS - The Financial Advisory and Intermediary Services Act
  This regulates any person or company who sells, gives advice on, or manages any investment product.
• CISCA - The Collective Investment Schemes Act
  This regulates any investment scheme which seeks to attract multiple investors into a single managed vehicle.
• FICA - The Financial Intellience Centre Act
  Policed by the Treasury as opposed to the FSB, this act requires any fiancial servcies provider to satisfactorily identify and 'know' their clients, and obliges them to report any (even possibly) suspicious activity that might contravene SA's money-laundering and tax laws.

Linked Investment Service Providers Association.

LISPA acts as an industry body committed to self-regulation of the LISP industry, and works closely with the FSB, the ACI(below), the Life Officers Association, and other industry bodies on setting and maintaining industry standards of transparency and integrity. LISPA and the ACI have done much valuable work with the FSB on the promulgation of the 3 new laws that now regulate the industry.

The LISPA website is at www.lispa.org.

The Association of Collective Investments

"The Association of Collective Investments (ACI) was established in 1967 as The Association of Unit Trusts (AUT) and represents the collective interests of South African management companies, registered foreign collective investment schemes and their investors. The primary aim of the Association is to facilitate the development and growth of the industry, through its dealings with the authorities and regular communication with the media and investing public. Working on behalf of its members, the Association acts as the custodian of codes of practice and standards throughout the industry, and is the forum for identifying and fulfilling common goals."

This statement of intent is quoted from the annual report of the ACI. However it is not easy working for both management companies and the unit holders, because these two "stakeholder groups" often have diametrically opposing needs. In practice, the ACI is far more representative of the management companies and their interests.

That said, the ACI has done much useful work in promoting industry standards of transparency and accountability, as well as the mandates, classification and reporting standards for unit trusts, and in lobbying for much needed changes to existing financial services legislation.

They can be found online at www.aci.org.za.