Be wary of publication - the risk of soliciting business in unapproved foreign collective investment schemes

A recent decision by the Financial Sector Tribunal highlights the unintended consequences of marketing unapproved foreign collective investment schemes in South Africa.

The solicitation of investments in an offshore collective investment schemes (CIS) is regulated in terms of section 65(3) of the Collective Investment Schemes Control Act 45 of 2002 (CISCA). The term 'solicit' is defined as "any act to promote investment by members of the public in a collective investment scheme". Unless a manager or operator of a foreign CIS has received approval from the Financial Sector Conduct Authority to solicit investments in a foreign CIS, a person who solicits investment in such foreign CIS is guilty of an offence.

In the recent decision of 36One Asset Management Proprietary Limited v The Financial Sector Conduct Authority (Case No.: a*/2019), the Financial Sector Tribunal (Tribunal) considered whether or not the publication of information on a website about an unapproved foreign CIS constituted solicitation for the purposes of section 65(3) of CISCA. Notwithstanding a disclaimer on the website stating that "[t]he information and documentation presented on this side do not constitute a solicitation, invitation or Investment recommendation…", the Tribunal held that the disclaimer was disingenuous and rejected 36One Asset Management Proprietary Limited's contention that it had no intention to promote investment in unapproved offshore CISs and that the information on its website about such funds was only for informational purposes and for transparency.

The decision of 36One highlights the risks of unintentionally marketing unapproved foreign CISs in South Africa. Even where information about a foreign CIS is published on a website for information purposes, such publication may nevertheless result in a manager of a CIS contravening CISCA.