Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002) > Schedules > Schedule 4 : Matters to be provided for in Rules of Association

(1)	Subject to the provisions of the Act and any exemption from or addition to the rules that may be granted or required by the registrar in a particular case, the rules of an association—

(a)	must provide to the satisfaction of the registrar—

(i)	for the manner in which and the conditions under which a body corporate qualifies for membership of the association;

(ii)	for the establishment of an executive committee from members of the association and the composition and functions of such a committee;

(iii)

for the manner in which and conditions under which members are to carry on their business so as to ensure compliance with the principles envisaged in section 2 of the Act;

(iv)	for the exclusion from membership if a member is controlled or administered by a person who is not of good character and high business integrity;

(v)	for the financial requirements and requirements in respect of training and experience with which a member, its directors and its employees must comply to be admitted as a member;

(vi)	for the exclusion of a body corporate from membership where a director of the body corporate, a person concerned in the management of the body corporate or a person who has substantial control of the body corporate, would be excluded from membership by virtue of the provisions of the Act;

(vii)

for disclosure of information, including the risks an investor is exposed to;

(viii)

for standards of conduct by members of an association and the investigation of complaints in respect of their activities;

(ix)	for co-operation with the registrar by the furnishing of information to him or her in respect of the business of the members of an association;

(x)	for the equitable and speedy settlement of disputes between members in respect of the carrying on of their business;

(xi)

(aa)	for an appropriate mechanism whereby a member which has been penalised by a committee or a competent person may appeal against the decision of the committee or person; and

(bb)

that the membership of a member may not be suspended or terminated unless he or she has been informed of the reasons for such suspension or termination and has had an opportunity to make representations to the executive committee, and that a person who has so made representations to the executive committee is entitled to be supplied with a copy of a record of the meeting at which his or her representations were considered;

(xii)

for the manner in which and conditions subject to which members of an association may advertise the services rendered by them;

(xiii)

(aa)	for the manner in which fees charged by members of an association for their services, are disclosed and notified to investors; and

(bb)	for the furnishing by members of an association to their investors of other information in respect of the business conducted by the members on behalf of investors;

(xiv)

in respect of a member of an association—

(aa)	for the recording of the transactions effected by the members of an association, their investors and trustee or custodian;

(bb)	for the separation of an investor’s funds and other corporeal or incorporeal things from the assets of the member;

(cc)	for prohibition of the use of funds belonging to one investor to finance the dealings of another investor;

(dd)	for prohibition of the use of an investor’s funds in operating the member’s own business; and

(ee)	that a member who buys any participatory interest from an investor or sells any participatory interest to an investor on his or her own account, must notify the investor concerned in advance that such participatory interest was bought or sold by the member for its own account;

(xv)	that, where relevant, a member must on request make available to an investor all information at the member’s disposal for determining the current value of a participatory interest;

(xvi)

(aa)	for the manner in which and conditions subject to which a participatory interest in a portfolio may be offered to members of the public;

(bb)	for the stoppage or suspension of the administration of a collective investment scheme or any part thereof by a member of an association or the quotation of prices in respect of such administration; and

(cc)	for the application of new or amended conditions imposed by an executive committee of an association upon the carrying on of existing business;

(xvii)

for ensuring delivery or settlement in respect of transactions effected by the members of an association either by the member’s or the association’s own arrangements or by means of arrangements made by the association with a financial institution or other association;

(xviii)

for the appointment of—

(aa)	an executive officer by the executive committee; and

(bb)	employees by the executive officer;

(xix)

for the dissolution of the association;

(xx)	for further measures to ensure that the business of the association in question is carried on with due regard to the interests of investors; and

(b)	may provide to the satisfaction of the registrar—

(i)	for the effective monitoring of compliance with, and enforcement of, the rules or any arrangements made by the association with a financial institution or exchange for the rendering of services or facilities in respect of the association;

(ii)	that a member must render sureties or security to the satisfaction of the executive committee, for the discharge of liabilities arising out of its activities;

(iii)

(aa)	that a fidelity fund must be established and maintained for the discharge, up to an amount specified in the rules, of outstanding liabilities of a member arising out of its activities; and

(bb)	that every member must contribute to such fund.

(2)

(a)	The association must as soon as possible after the granting of a licence, publish its rules in the Gazette in English and any one other official language at the expense of the association concerned and furnish the registrar with a copy thereof.

(b)	No amendment, other than a suspension, of the rules is valid, unless—

(i)	the fee prescribed by the registrar has been paid;

(ii)	it has been approved by the registrar in writing;

(iii)

a date has been stipulated in the registrar’s approval for the coming into operation of such amendment; or

(iv)	it is consistent with this Act.

(c)	The registrar must, after considering any objection contemplated in paragraph (f), approve or disapprove an amendment referred to in paragraph (b) within a period of 60 days after expiry of the period referred to in paragraph (f).

(d)

If the registrar does not disapprove of an amendment referred to in paragraph (b) within a period of 60 days after expiry of the period referred to in paragraph (f), the registrar is regarded as having approved it and such amendment comes into operation on the day immediately following upon the date of expiry of the aforesaid period of 60 days.

(e)	Upon receipt of an application for approval in terms of paragraph (b), the registrar must cause to be published at the expense of the association in English and any one other official language in the Gazette a notice setting forth the proposed amendment.

(f)	The said notice must call upon all interested persons, other than members of the association concerned, who have any objection to the proposed amendment to lodge their objection with the registrar within a period of 30 days from the date of publication of the notice in the Gazette.

(3)	A rule made under this section is binding on all members and on all officers or employees of members and on every person utilising the services of a member or who concludes a transaction with a member in the course of that member’s business.

(4)

(a)	A rule may, in respect of each contravention or failure to comply therewith by a member or an officer or employee of a member, specify one or more of the following penalties:

(i)	A reprimand;

(ii)

censure;

(iii)

a fine not exceeding one million rand, which amount is payable to the fund referred to in of item 1(b)(iii) or, if such fund does not exist, to the relevant association;

(iv)	suspension or cancellation of membership; or

(v)	a direction to a member to terminate the employment of an officer or employee.

(b)

The rule contemplated in paragraph (a) may also specify that full particulars regarding the imposition of a penalty must be published and that any member, officer or employee who contravenes or fails to comply with a rule may be ordered to pay the costs incurred in the investigation or hearing in question.

(5)	Whenever the registrar considers it desirable in the public interest, he or she may, after consultation with the executive committee of an association, amend the rules of that association by notice in the Gazette.

(6)

(a)

Subject to the prior approval of the registrar, an executive committee may suspend any of the rules of an association for a period not exceeding 90 days at a time and may during such suspension by resolution likewise approved issue a directive to regulate the matter in question until such time as an appropriate amendment of the rules can be made in terms of this item.

(b)	Items 3 and 4 apply in respect of any contravention of or non-compliance with a directive.

Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002)

Schedules

Schedule 4 : Matters to be provided for in Rules of Association (Section 32)