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ETF REGULATORY ENVIRONMENT

Most ETFs are structured as Collective Investment Schemes and as such are regulated in terms of the Collective Investment Schemes Control Act, Act No. 45 of 2002 (‘CISCA’).

CISCA prescribes the asset classes that a CIS may invest in, as well as several other regulations and requirements. While the Financial Services Board is the main regulator of the Scheme, the day to day compliance with the appropriate legislation is monitored by the Trustee, ABSA Bank.

Bips Collective Investment Scheme is administered by Bips Investment Managers (Pty) Limited, a wholly owned subsidiary of FirstRand Investment Holdings Limited.

Regulation 28

Regulation 28 to the Retirement Funds Act provides limits to the underlying investments of retirement funds. Broadly speaking, Regulation 28 sets maxima for specific asset classes in which retirement funds may invest. These asset classes are equity, fixed interest, property and ‘other assets’.

Collective Investment Schemes do not, in their own capacity, fall into any one of these categories. Instead, the FSB applies the ‘see-through principle’ to investments by retirement funds into CIS’s. This means that instead of seeing the CIS as a holding in the retirement fund, the fund ''sees through'' the CIS and is deemed to hold the assets held by the CIS.

A retirement fund holding an equity CIS will be deemed to be holding the equity shares held in the CIS. Similarly, a retirement fund holding a fixed income CIS will be deemed to be holding the fixed income securities underlying the CIS.

As most ETFs are regulated by the Collective Investments Schemes Control Act, the ‘see-through principle’ will apply for the purposes of Regulation 28.

Exchange Control

Bips Exchange Traded Funds that hold local securities do not have exchange control implications for investors.

Former residents of the Common Monetary Area who have emigrated are permitted to use their emigrant blocked funds to subscribe for Bips Securities. All payments using emigrant blocked funds must be made through the Authorised Dealer in foreign exchange controlling the emigrant’s blocked assets. Bips Securities issued pursuant to the use of emigrant blocked funds, will be credited to the applicant’s blocked share accounts at the Central Securities Depository Participant controlling their blocked portfolios.