3rd Regulatory Summit

SAIFM’s 3rd Regulatory Summit, held on 22 September 2016 at Hyatt Regency was yet again a resounding success commencing with our keynote speaker, futurologist Mr Clem Sunter. Clem, highly sought-after and well-known for his books [...]

Is the tail wagging the dog?*

Historically, the assumption has been that because markets are rational, the allocation of savings for the highest return reconciles the functions of savings so that all interests are aligned. But markets are not rational, and so this raises the question of who, if anyone, is being served by the allocation of capital. Critically, it raises the questions of whether or not savings are serving the investors who painstakingly sacrifice consumption today for the hope of better tomorrow…

Cyclone climate change: The bell to hell?

Occasioned by carbon and other green-house gas emissions stemming from human activities, cyclone climate change (CCC) is resolutely travelling at an incremental acceleration in excess of the globally-endorsed danger limit of two Degrees Celsius (20C) in the direction of all cardinal and ordinal points of the compass. In her wake, a trail of destruction to the tune of US$2.5 trillion is anticipated off global financial assets…

Robo Advice – friend or foe to the advisor?

Robo-advice is a hotly debated topic, both with regard to the term itself and what it represents but the term is broadly used to describe any automated direct to customer financial advice or guidance. More recently the term has also been applied to applications that seek to advise, or guide, consumers through the process of selecting packaged retail investment, savings and protection products to enable consumers to address specific rather than holistic needs…

From muddling to miracle: The path to maintaining SA’s credit rating

The South African economy is just muddling along – we aren’t shooting the lights out, but we haven’t sunk into the depths of a recession. But wouldn’t it be awesome if we could break out of our no-growth shackles? We can. And it’s not far-fetched either…

A cautionary tale for all financial service providers

A warning has been sounded to all financial service providers to behave responsibly when taking steps to remove a representative from the register. When being removed from the register, representatives are entitled to fair administrative action and should be notified of the nature and purpose of a decision to remove them from the register and given an opportunity to be heard before the decision is taken…

From “risk-free” to “return-free”

The Holy Grail of investing is to increase returns whilst reducing risk – thus constructing a superior risk-adjusted return. But investors looking for this in today’s environment are likely to be sorely disappointed. We are in an era where there is a fundamental redefinition of risk taking place: cash and bonds, previously considered “risk free” are now – in light of low and negative interest rate and inflationary environments – in fact “return free” asset classes…

OTC Derivatives Regulations

The draft regulations published for comment included the code of conduct for OTC Derivatives Providers, the requirements and duties of a Trade Repository and the criteria for authorisation of an OTC Derivatives Provider…

The King IV Report

The King IV report is to move away from the 'box ticking' approach of compliance and aims towards value-added compliance. One of the notable features is that King IV creates several sector supplements, which are industry specific including a supplement that applies to the retirement funds industry…

Vicarious liability for bad investment advice – Sharemax debacle continues

Earlier this year the Ombud for Financial Services Providers handed down a far-reaching determination by holding that Momentum was vicariously liable for its representative advising the complainant to invest in a property syndication scheme offered by Sharemax, which subsequently went bankrupt...

Additional margin OTC Derivatives

To fully understand the impact of the new Margin Requirements on the South African OTC derivatives market, it is essential to determine which types of derivatives contracts will be subject to the mandatory clearing requirement under the new regime…

Rising stars and fallen angels

The notion that investing in large companies is a safe investment approach is not correct. If anything, investors should have anxious nights if they have invested in large companies based solely on the premise that they are blue chips. The probability of being invested in an underperforming share, or worse, a potential fallen angel, is real when subscribing to the view that large companies are “safe”, “too big to fail” and come with an assurance of good returns…

Twin peaks: Impact on retirement fund

The creation of the Financial Sector Conduct Authority was seen to be imperative after National Treasury identified various issues relating to inter alia the conduct of business in the financial sector that has led to poor outcomes for financial customers. The Twin Peaks reforms aims to provide the institutional structure necessary to implement a more comprehensive and consistent strategy to improve market conduct and deliver better outcomes for financial consumers…

New stock exchanges enter the South African market

These are exciting times for the South African financial markets with frenetic activity in the market infrastructure space and in particular the launch of new stock exchanges. Two new stock exchanges have already been licensed and further applications are pending. This development should bring an end to the dominant position of the JSE in this sphere and the benefits of increased competition such as innovation, increased electronic trading capabilities and the lowering of trading and other costs should become evident…

Exemption: Securities Transfer Tax

For years, the SA securities lending industry had been lobbying for an exemption from STT for the outright transfer of listed equity securities as collateral. The exemption is for purposes of benefitting the industry by removing adverse tax consequences. National Treasury finally introduced the exemption on 1 January 2016 in respect to collateral arrangements entered into on or after that date…

Beware those on-demand guarantees

A recent Supreme Court of Appeal judgment has caused some confusion when it was found that a purported on-demand guarantee was inextricably linked to the performance by the debtor in respect of the underlying contract and therefore to be akin to a suretyship, as opposed to an on-demand guarantee…

Do we take our money seriously?

Our personal money management often falls into the “tomorrow is another day” denial space. Many of us don’t take our personal financial health seriously enough. We often just get by and don’t look to improve our personal money habits and or prioritise our goals. How can we take charge of our finances and what are the questions that we should ask ourselves…

When does a creditor’s claim prescribe?

The Supreme Court of Appeal was recently faced with this question with regard to loan agreements: does prescription on the full amount advanced commence running when the creditor elects to enforce the acceleration clause or when the debtor defaults on payment of an installment…

Voidable sale of business

The purpose of the legislation was to prevent businesses (traders) in financial difficulties from selling of their business to third parties without advertisement to all other creditors and in so doing, from dissipating the purchase price or using the purchase price to pay certain creditors regardless of the claims of others. The question arises whether an enterprise that lets and hires immovable property will be subject to the legislation…

Basel III implementation

In South Africa, recently promulgated banking regulations are paving the way for the regulators to assess whether or not South African banks will be ready to conform to the Basel III standards even though full implementation of Basel III is not due until 1 January 2018. Banks will be under pressure to conform to the new standards and should already have started reporting on how they are positioned for compliance…

Offshore investments

Investing offshore has been a hot topic of late. The rand’s weakness, coupled with South Africa’s low economic growth, has driven many to consider offshore investments as something of a safe haven. However, as the Brexit market turmoil has demonstrated, offshore investing in and of itself is not a panacea…

Bulk trades: Enhanced Functionality

The JSE has introduced a series of Equity market enhancements to allow market participants to buy and sell large blocks of shares and to trade anonymously within the best bid and offer without interference. The enhancements form part of the JSE’s multi-year Integrated Trading and Clearing (ITaC) project…

Is blockchain really a silver bullet?

Blockchain is being spoken of reverently – and irreverently – by business pundits, and backed by media and industry leaders as a potential cure for all financial threats/hurdles across the globe. A blockchain has been promoted extensively as the latest ‘must-have’ technology for financial and related institutions…

The rand: fractured or fragile? Looking beyond the rating concerns

South Africa may have been given a temporary reprieve in terms of a maintained investment grade sovereign rating, but what is the underlying trend for the rand? To assess the status and stature of the rand, we conducted a study of various metrics within each of these drivers to arrive at a ranking for South Africa…

Roll-over relief: Amalgamations

Parties to an amalgamation transaction will qualify for roll-over relief whereby certain tax liabilities that would arise in the normal course are deferred, provided that the requirements of the section are met…

Potentially devastating provision

The High Court had cause recently to consider this legislation in Sanlam Capital Markets v Mettle Manco 2014 (3) All SA 454 (GJ). The terms of law do not come wider than this: the gist of the section means that any person, including shareholders, directors and creditors could use it to claim back a loss caused by any other persons for any contravention of the Act…

5 tips to save thousands

The adage “a penny saved is a penny earned” could not be more pertinent in times of political instability and chronic low economic growth which has made investors fearful. In addition, it is difficult to find returns over and above the seemingly increasing inflation mark. Yet there are common sense strategies that investors could employ to improve their financial position…

Star Trek and your retirement

For most people the word retirement creates a vision of doing what you want every day and not having to answer to a boss. For some closer to the D-date, the word leaves us with an uneasy feeling in the pit of our stomachs, knowing that we should have started saving earlier. And for young people the word is a very alien concept…

Hedge funds – friend or foe?

In South Africa many hedge funds are now regulated under the Collective Investment Schemes Act and available as unit trust funds to the general public. Many South African investors ask whether they should excitedly welcome this investment opportunity or with trepidation steer well clear…

Taxation of Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) have become a popular investment tool in SA as it is a low-risk investment and is easily accessible to investors. Most REITs in SA specifically invest in commercial property. During May 2016, the South African Revenue Service released a draft interpretation note on the taxation of Real Estate Investment Trusts…

Currency valuations for investors

For investors looking to externalise funds, currency levels should play a big part in the decision process as the rate at which forex is acquired sets a hurdle in one’s mind when investing. However, it is important to make offshore investments for the right reasons (such as access to alternative sectors and geographic diversification) and to ignore the currency effect when evaluating performance…

WFE: Emerging market liquidity

The World Federation of Exchanges has released a report to provide regulators and exchange operators with ideas around how to grow and enhance market liquidity. Many emerging markets suffer from low levels of liquidity, effectively placing a constraint on economic and market development. Liquidity is positively associated with broader market development, and often creates a virtuous circle, resulting in encouraging effects for the underlying economy…