Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002)Board NoticesDetermination on the requirements for hedge fundsPart 3 : Retail Hedge Fund6. Liquidity and repurchases |
| (1) | A manager may borrow up to ten per cent of the value of a portfolio for liquidity purposes in respect of the repurchase of participatory interests. |
| (2) | A manager may not encumber any assets of a portfolio, except for investment purposes. |
| (3) | A manager must have an appropriate framework to measure and manage the liquidity risk of each portfolio against its repurchase obligations. |
| (4) | A manager must implement and maintain a repurchase policy, which policy must provide for— |
| (a) | a level of liquidity for each portfolio that would enable the manager to repurchase participatory interests within one calendar month of receipt of an investor instruction to repurchase; |
| (b) | subject to subparagraph (5), the circumstances under which the manager may suspend repurchase of participatory interests. |
| (5) | A manager may only suspend the repurchase of participatory interests— |
| (a) | in exceptional circumstances and when in the interest of investors; and |
| (b) | in accordance with the Notice of Suspension of Repurchase of Participatory Interests by Manager of Collective Investment Scheme In Securities prescribed by the registrar under section 114(3)(f) of the Act. |
| (6) | A manager must inform the registrar of any suspension of the repurchase of participatory interests without delay. |
| (7) | Where the inclusion of a derivative results in an immediate or future commitment for a portfolio, the following liquidity requirements apply— |
| (a) | for a derivative that may require settlement in cash, the portfolio must at all times hold sufficient assets in liquid form to effect the required settlement; and |
| (b) | for a derivative that requires physical settlement, the portfolio must hold the physical asset or hold sufficient assets in liquid form to cover the full payment obligation for the physical asset. |
| (8) | A manager must conduct a self-assessment exercise of each portfolio to determine its adequate exposure calculation (value-at-risk or commitment approach). |