Investment Practices and FAIS

Investment Practices and FAIS

Trust account practices are urged to read rule 55 in full to get more information on Investment Practice Rules. Refer and Download the Payment of Unclaimed and Unknown trust monies in term of Section 87 4 of the LPA.

Investment Practices and FAIS

  • Rule 55.2 – A client shall for the purpose of this investment practice rule include any person on whose behalf a firm invest funds or manages or controls investments, whether or not such person is otherwise a client of the firm concerned
  • Rule 55.4 – A firm carrying on an investment practice shall obtain an investment mandate from each client before or as soon as possible after investing funds for that client. The form of the investment mandate shall be substantially in the form of the Ninth Schedule to these rules and shall contain a statement that the client acknowledges that moneys so invested DO NOT enjoy the protection of the Fund.
  • Trust account practices are urged to read rule 55 in full to get more information on Investment Practice Rules. Refer and Download the Payment of Unclaimed and Unknown trust monies in term of Section 87 4 of the LPA.
  • Following on an opinion sought, the Law Society of South Africa (LSSA) sought clarity from the Financial Sector Conduct Authority (FSCA), previously known as the Financial Services Board (FSB), and were advised in July 2015 by the Deputy Registrar of the FSB that investments in terms of the LPA would not fall within the ambit of the FAIS Act, while investments in terms of the Rules would require compliance with the FAIS Act. As such trust account practices that run investment practices are required to be licensed with the FSCA as Financial Service Providers (FSPs).
  • Proper and accurate distinctions of investments should be made by legal practices when investing client funds in terms of the Act or the Rules so as to ensure compliance with relevant legislation and/or regulations.
  • Legal practices who invest monies in terms of the rules are running an investment practice and must ensure that they:
  • Are licensed to do so by the FSCA
  • Obtain a mandate from their client to invest his or her money
  • Make an accurate classification of an investment at all times
  • Explicitly disclose to the client that the investment is NOT protected by the Fund and
  • Fully comply with the requirements of the FAIS Act