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September 2018

Dear stakeholder

The ASISA Board reviewed the ASISA strategy on September 13 to ensure that it remains aligned to industry priorities as well as the national agenda.

Following robust discussion regarding the current state of the country’s economy and ASISA’s role and involvement, the Board agreed that the current strategy remains valid and appropriate. The following are therefore still considered strategic industry priorities:

  • Transformation
  • Inclusive economic growth and access
  • Policy certainty

ASISA, through its Board and Board Committees, will therefore continue to prioritise deliverables in support of these industry imperatives, while maintaining its focus on business as usual in line with its mandate.

Clarifying ASISA’s stance on increased allocation of assets to black managers

On 26 September ASISA attended a media briefing by the Financial Sector Transformation Council (previously the Financial Sector Charter Council). The Council is the governing body of the Amended Financial Sector Code (FSC), which came into effect on 1 December 2017. ASISA played a key role in negotiating the Financial Sector Code and holds three seats on the Council.

Following the media briefing, the Business Day published an article under the headline “Asisa will not back BEE targets for assets”. Quoting Leon Campher, the article confused the concept of “prescribed assets” with the allocation of assets to black asset managers. This misunderstanding created the wrong impression that ASISA is opposed to giving black asset managers greater access to market.

A subsequent correction, which erroneously stated that it is actually the Financial Sector Transformation Council that is opposed to allocations for black managers, further highlighted this misunderstanding.

In a letter to the Business Day Editor, Leon therefore set the record straight as follows:

  • When the term “prescribed assets” is used, it is understood to refer to Government forcing the savings industry to buy Government stock as well as bonds issued by State Owned Enterprises (SOEs). ASISA will not back “prescribed assets” as this does not solve any problems for the country. It did not work when introduced by the Apartheid government and would have equally devastating effects on the country should it be introduced now.
  • ASISA does, however, firmly support greater allocation of assets to black asset managers. The point needs to be made that a large proportion of the assets that can be allocated sits in the retirement fund industry and ASISA and its members have no influence over how and by whom these assets are managed. The retirement fund industry holds assets of R3.6 trillion. The PIC alone manages R2 trillion of these assets on behalf of the GEPF. ASISA is therefore in support of making the voluntary scorecard for retirement funds, which includes procurement targets, compulsory as this could result in greater allocation of assets to black owned asset managers.
  • Also, ASISA’s large member companies are in a position to give black asset managers greater access to market via their LISP platforms, umbrella funds and multi-managers. However, ASISA has no influence over this as this would be in violation of the Competition Commission rules. The decision to provide access to market must therefore always be a business decision taken by individual companies.

Taxation of Collective Investment Schemes

National Treasury agreed to our request to withdraw the proposed change in tax policy for Collective Investment Schemes (CIS), as outlined in the 2018 draft Taxation Laws Amendment Bill (TLAB), to allow for further consultation aimed at finding ways to best address concerns regarding frequent transactions in CIS portfolios. 

In verbal and written submissions to Parliament’s Standing Committee on Finance (SCoF) during public hearings in August on the draft TLAB, ASISA proposed the formation of a technical committee to consider all relevant facts and make proposals to the policy maker.  The committee should consist of representatives from National Treasury, the South African Revenue Service (SARS), the Financial Sector Conduct Authority (FSCA) and ASISA.

We believe that together we can develop targeted interventions that would not have unintended consequences and would not create unnecessary risk for what has become one of the most established savings vehicles in the world.

In the meantime the FSCA issued a warning letter to the CIS industry on tax avoidance using CIS funds, referring to excessive churning in portfolios and also to CIS funds being set up exclusively for a few wealthy private individuals and investor groups.

Retail Effective Annual Cost (EAC) Disclosure Standard

The ASISA Board on 13 September 2018 approved certain practical and clarificatory amendments to the Retail EAC Disclosure Standard.

In addition, an Addendum for Universal Life Products was added to the Standard in respect of financial products sold before 2000. We believe the Addendum ensures valid and meaningful disclosure for clients, whilst keeping with the principles of the Standard. The Addendum was also approved by the ASISA Board.

Retirement Savings Cost (RSC) Disclosure Standard

A number of ASISA members indicated that they were struggling to meet the RSC Disclosure Standard implementation date of 1 March 2019 due to IT prioritization issues and regulatory commitments. An extension was therefore granted to 1 September 2019, by which date all members must have implemented the RSC Disclosure Standard. The RSC Disclosure Standard was also amended to include a template to assist with data collection.

Financial Sector Laws Amendment Bill

National Treasury released the Financial Sector Laws Amendment Bill 2018 for public comment by 7 November 2018.  The Bill proposes to amend a number of Acts to provide for the establishment of a framework for the resolution of banks and systemically important non-bank financial institutions to enable the SARB to appropriately manage the impact of a failure of such an institution on financial stability.  The Bill also provides for the establishment of a deposit insurance scheme, including a Corporation for Deposit Insurance and a Deposit Insurance Fund.

ASISA invited members to submit comments by 18 October 2018.  Depending on the feedback from members, ASISA may establish a Working Group.

Regulation of Cell Captive arrangements

Comments on the draft Conduct Standard for Cell Captives were submitted by ASISA to the FSCA on 31 August 2018.  The FSCA is holding a workshop on 29 October 2018 to engage on the concerns raised through the public consultation process and to discuss the way forward relating to the cell captive insurance regulatory framework.

Replacement Advice Records

ASISA submitted members’ comments on the Draft Format for the Replacement Advice Record for individual risk policies to the FSCA. Once finalised, this will be the prescribed format as provided for in Rule 19 of the Policyholder Protection Rules (PPR).

Final amendments to the PPR and Long Term Insurance Act Regulations

The final version of the amendments to the PPR and Long Term Insurance Act Regulations, commonly known as the “Tranche 2” amendments, were published on 28 September 2018.

ASISA Foundation

The ASISA Foundation hosted the fourth awards ceremony for students who had successfully completed five weeks of the Saver Waya Waya Financial Literacy Programme for Technical and Vocational Education and Training (TVET) Colleges.

More than 1 000 students from the four Sedibeng TVET College campuses participated in the programme during 2018. Sedibeng TVET College is one of eight public colleges in Gauteng. The college is situated in the South of Johannesburg in the Sedibeng District Municipality. Sedibeng is the Sotho term for a “well”.

Delivered by the Foundation in collaboration with the Absa Group, the programme is specifically designed for final year students in disadvantaged communities with the aim of preparing them for the job market and managing their money once they start earning an income.

Academy Newsflash

The Academy kicked off the Independent Financial Adviser (IFA) internship programme selection process for 2019 with a "speed dating" session in Johannesburg. The speed dating interviews bring together representatives from IFA practices and potential interns.

Interviewers have three minutes to decide whether there is a potential fit. IFA practices then shortlist candidates for formal interviews. The Academy has signed up 36 IFA practices in Johannesburg, Durban, Port Elizabeth and Cape Town for 2019. The interview sessions in the remaining centres will take place during October.

The IFA internship programme provides high potential black graduates who have a keen interest in financial planning with the opportunity to intern at established top performing IFA practices.  Interns participate in a structured programme that offers a powerful combination of work-readiness input, theoretical knowledge and practical work experience delivered by the Academy in partnership with the IFA practices.

Since the key objective of our internship programmes is to create desperately needed employment opportunities for black graduates wanting to pursue a career in the savings and investment industry, the conversion rate of internships to permanent employment is the true measure of the success of the internship programmes. We are proud of the fact that in 2017 more than 80% of the Academy’s IFA interns received offers of permanent employment from their hosting IFA practices.

Kind regards

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