Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002)Board NoticesAdvertising, marketing and information disclosure requirements for collective investment schemesPart III : Mandatory Disclosures6. Mandatory disclosures |
| (1) | A manager must include the following disclosures in all marketing material: — |
| (a) | collective investment schemes are generally medium to long-term investments; |
| (b) | the value of participatory interests or the investment may go down as well as up; |
| (c) | past performance is not necessarily a guide to future performance; |
| (d) | collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending; |
| (e) | a schedule of fees and charges and maximum commissions is available on request from the manager; |
| (f) | a detailed description of how performance fees are calculated and applied; |
| (g) | a statement that the manager does not provide any guarantee either with respect to the capital or the return of a portfolio. |
| (2) | In addition to the general disclosures in subparagraph (1), a manager must disclose, in respect of— |
| (a) | an exchange traded fund registered as a collective investment scheme, |
| (i) | that the exchange traded fund is listed on an exchange and may therefor incur additional costs; |
| (ii) | the difference between an exchange traded fund and other collective investment scheme portfolios; |
| (iii) | the index that the exchange traded fund tracks and how it will track the index; |
| (iv) | where an investor can view the index and its performance as tracked by the exchange traded fund; |
| (v) | the tracking error of the exchange traded fund; |
| (vi) | where the index tracking portfolio engages in securities lending activities, information on such securities lending activities, the percentage of securities lent out, the names of all the counterparties related to these activities as well as the risks associated with counterparty exposure; |
| (b) | a money market portfolio— |
| (i) | that a money market portfolio is not a bank deposit account; |
| (ii) | whether the price of a participatory interest is a marked-to-market value or targeted at a constant value; |
| (iii) | that the total return to the investor is made up of interest received and any gain or loss made on any particular instrument; and that in most cases the return will merely have the effect of increasing or decreasing the daily yield, but that in the case of abnormal losses it can have the effect of reducing the capital value of the portfolio; |
| (iv) | how the yield is calculated; |
| (v) | that excessive withdrawals from the portfolio may place the portfolio under liquidity pressures; and that in such circumstances a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed; |
| (c) | a portfolio that derives its income primarily from interest-bearing instruments in accordance with section 100(2) of the Act, whether the yield is historic or current as well as the date of calculation of the yield; |
| (d) | a fund of funds portfolio, that a fund of funds is a portfolio that invests in portfolios of collective investment schemes that levy their own charges, which could result in a higher fee structure for the fund of funds; |
| (e) | a feeder fund, that a feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levies its own charges and which could result in a higher fee structure for the feeder fund; and |
| (f) | a third-party-named portfolio, that the manager retains full legal responsibility for the third-party-named portfolio. |
| (3) | Where foreign securities are included in a portfolio, the manager must, before entering into a transaction to purchase foreign securities, disclose to potential investors any material risk, such as— |
| (a) | potential constraints on liquidity and the repatriation of funds; |
| (b) | macroeconomic risks; |
| (c) | political risks; |
| (d) | foreign exchange risks; |
| (e) | tax risks; |
| (f) | settlement risks; and |
| (g) | potential limitations on the availability of market information. |