FSCA Communication 10 of 2025 (CIS)

FSCA COMMUNICATION 10 OF 2025 (CIS)
Publication of an exemption of money market portfolios of collective investment schemes from the provisions of Chapter 2, Condition 8(4)(b) of Board Notice 90 of 2014 (BN 90)

1. PURPOSE
   1.1. The purpose of this Communication is to inform stakeholders that the Financial
   Sector Conduct (FSCA) published today on its website, FSCA CIS Notice 2 of 2025

• Exemption of Managers of Money Market Portfolios from certain requirements of
  BN 90, 2025.
  1.2. The exemption excludes money market portfolios of collective investment
  schemes (CIS) from Chapter 2, Condition 8(4)(b) of BN 90, which determines the applicable rate of the instruments that must be known in advance, subject to a 24- hour historic limitation.

2. BACKGROUND
   2.1 Post its establishment in 2018, the FSCA has been evolving its regulatory
   landscape and frameworks to align with and provide for the second phase of the Twin Peaks reform process as contemplated in the future Conduct of Financial Institutions Bill.
   2.2 Part of the change to the regulatory environment and landscape has been,
   amongst others, the need to adjust legislation, where it references defunct indices, to the updated versions of such indices. The relevant and necessary change in this regard as discussed herein relates to BN 90 which provides for the Determination of Securities, Classes of Securities, Assets or Classes of Assets that may be included in a Portfolio of a Collective Investment Scheme in Securities and the Manner in which and the Limits and Conditions Subject to which Securities and Assets may be so included.
   2.3 The full review of BN 90 remains ongoing and given the volume of outstanding
   work still to be completed, it is anticipated that the review process may take additional time and could therefore be delayed.
   2.4 However, the FSCA acknowledges the potential impact of the afore-mentioned
   delay on money market portfolios that are required to include money market instruments on a legal rate referenced basis. Accordingly, this exemption is being published to provide for such portfolios.

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2.5 Further, a key reason is the recently communicated decision by certain
stakeholders to proceed with a May 2025 go-live for the issuance and trading of interest rate linked instruments tied to a new benchmark. This includes both listed instruments and bank paper, following the discontinuation of Jibar-based issuance as of Q1 of 2025 and introduction of the Zaronia.
2.6 Currently, Condition 8(4)(b) of BN 90 requires that the rate included in the
instrument need to be known in advance.
2.7 Consequently, the FSCA and relevant stakeholders acknowledge that, due to the
aforementioned developments and the ongoing BN 90 review not yet being finalized, money market portfolios will be unable to participate in this form of bank funding in the absence of an exemption or guidance. Furthermore, money market portfolios would be compelled to restrict their investment holdings to fixed rate or prime linked instruments, as even for overnight placements, the applicable rate would only be known the following day.
2.8 Accordingly, the FSCA has resolved to issue this general exemption to
accommodate the developments outlined above.
2.9 The FSCA believes that this exemption is in the public interest and does not
undermine the objectives of CISCA. It merely facilitates the transition of money market instrument rate referencing from Jibar to the Zaronia benchmark interest rate and other similar rates.
3. ENQUIRIES
For more information regarding this Communication, please contact the Regulatory Frameworks Department of the Authority by emailing Mr Marius de Jongh: Marius.deJongh@fsca.co.za. ____________________ KEDIBONE DIKOKWE DIVISIONAL EXECUTIVE: CONDUCT OF BUSINESS SUPERVISION FINCANCIAL SECTOR CONDUCT AUTHORITY Date of publication: 24 April 2025