The Financial Sector Conduct Authority has finalised a new regulatory framework governing how foreign collective investment schemes (CIS) may solicit investments in South Africa, marking the most significant overhaul of the regime in more than a decade.
The framework, set out in FSCA CIS Notice 1 of 2026, came into effect on 30 March 2026 and formally repeals Board Notice 257 of 2013, which has governed foreign CIS approvals since December 2013.
The determination introduces a prescribed application format and more detailed conditions for foreign schemes seeking approval under section 65 of the Collective Investment Schemes Control Act (CISCA), as well as ongoing conditions for maintaining that approval.
A framework driven by legal and regulatory gaps
In its Statement of Need and Impact, the FSCA makes it clear that the changes are not merely incremental but respond to structural and legal shortcomings in the existing regime.
The regulator notes that Board Notice 257 had become outdated in the context of a broader shift “from a predominantly rules-based approach of regulation to a principles-based approach”, while earlier guidance failed to resolve persistent classification challenges.
A more immediate catalyst was the Financial Services Tribunal’s decision in Greenman Investments SCA, SICA-Fis v FSCA (2021), which highlighted limits in the regulator’s powers in assessing foreign schemes.
According to the FSCA, the Tribunal found that the Authority could not apply provisions of CISCA to foreign schemes unless those provisions were explicitly made applicable, and it could not categorise a scheme and then select the sections of CISCA which it thinks should apply.
This exposed gaps in the existing framework and prompted a comprehensive review of BN 257.
Consultation highlights tensions around scope and discretion
The determination follows a formal consultation process, with a draft published in August 2024 and comments closing in October 2024.
The consultation report identifies three key areas of concern raised by commentators.
The first related to conditions in the draft determination governing prohibited investment and borrowing. Commentators argued that these provisions were “unreasonably restrictive” and, in some instances, “contradictory to the principles-based approach”, because they imposed blanket limitations on certain strategies.
The second concerned the treatment of certain foreign schemes as collective investment schemes in securities, with industry participants highlighting potential gaps where some offshore structures may not align neatly with South African regulatory categories.
The third area of concern related to the use of a “public interest” test in assessing applications. Commentators argued that the absence of clear parameters introduces uncertainty and makes it difficult for managers and trustees to replicate the FSCA’s decision-making.
In response, the FSCA stated that a principles-based approach “does not imply the complete absence of any rules”, and certain restrictions are necessary to ensure defined outcomes for investor protection. It also emphasised that the exercise of discretion under the public interest test is “not open ended”, but based on regulatory and supervisory insights, and indicated that further guidance may be considered.
Changes since the draft version
Although the final determination retains the overall structure of the draft, the consultation process resulted in targeted revisions.
In particular, the FSCA amended the provisions relating to prohibited investments. References to “complex or exotic” derivatives and structured products were removed as outright prohibitions, and the restriction on synthetic instruments was narrowed to apply only in a non-qualified investor context.
According to a commentary by Bowmans, the revised treatment of synthetic portfolios and exchange traded funds represents the most visible change in the final instrument. Synthetic portfolios and ETFs that create synthetic exposure are now permitted where they are marketed only to “qualified investors”, as defined in Board Notice 52 of 2015.
The Consultation Report indicates a shift towards a more supervisory approach. Rather than relying solely on blanket prohibitions, the FSCA will assess the use of complex instruments and strategies on a case-by-case basis as part of its broader evaluation of whether a scheme may be marketed in South Africa.
More detailed requirements and a stronger approval framework
The determination introduces a prescribed application format, requiring foreign schemes to provide detailed information on their legal structure, governance, regulatory oversight, prospectus, financials, and intended marketing approach in South Africa.
The burden of demonstrating compliance rests squarely on the applicant. During consultation, industry participants raised concerns about practical requirements such as obtaining confirmations from foreign regulators, but the FSCA maintained this remains the responsibility of the applicant and a basis for approval decisions.
At a substantive level, the determination sets out a range of conditions relating to both approval and ongoing operation. These include requirements that the scheme be authorised and supervised by a foreign regulator with an equivalent regulatory framework, and it be offered to the same type of investors in its home jurisdiction and South Africa, and that its risk profile is not significantly higher than that of comparable domestic collective investment schemes.
The determination also requires that schemes maintain sufficient liquidity to support regular redemptions and ensure the safeguarding and segregation of investor assets.
Separately, the framework imposes conduct standards and governance requirements, including, including that operators act honestly, fairly, and in the interests of investors, maintain appropriate governance arrangements and manage conflicts of interest, and ensure that disclosures are not false, misleading or deceptive.
It also provides for the use of techniques such as efficient portfolio management, subject to regulatory assessment, and introduces ongoing reporting and notification requirements to support supervision.
Greater reliance on supervisory judgement
A feature of the new framework is the extent to which approval decisions rely on supervisory judgement rather than purely prescriptive rules.
The “public interest” test, in particular, functions as a central filter through which the FSCA evaluates whether a foreign scheme may be marketed to South African investors. This includes assessing the appropriateness of investment strategies, the use of complex instruments, and the overall risk profile of the scheme.
The consultation process also indicates a move away from rigid categorisation. The FSCA confirmed that applications will be evaluated on a case-by-case basis, with the Authority able to determine the appropriate category, target market, and any additional conditions required to align foreign schemes with domestic regulatory standards.
Local presence and accountability requirements
The determination requires foreign operators to establish a representative office in South Africa or enter a representative agreement with a locally registered manager.
These arrangements impose compliance obligations on the local representative and may, in certain circumstances, require the representative to compensate investors for losses arising from non-compliance by the foreign operator.
This requirement effectively anchors foreign schemes within the local regulatory framework, strengthening the FSCA’s ability to supervise and enforce compliance.
Transitional provisions
The determination took effect on 30 March and includes transitional provisions to limit immediate disruption.
Approvals granted before that date remain in force, although they may be withdrawn in accordance with CISCA, while applications submitted but not finalised before commencement will continue to be assessed under Board Notice 257.
These provisions mean that new applications are assessed under the updated framework, while existing approvals and certain pending applications continue under the previous rules.
A shift towards stronger oversight
The FSCA characterises the determination as part of a broader effort to align the regulation of foreign schemes with international best practice and its own supervisory experience since 2013.
The determination is intended to result in “a stronger and more appropriate regulatory framework” governing the solicitation of foreign CIS in South Africa, with improved protection for financial customers.
Both the FSCA and industry participants indicated during consultation that the determination is not expected to have a material impact on compliance or operational costs, because it is largely based on existing requirements under the previous regime.
A more structured, but more discretionary regime
Taken together, the determination replaces a largely guidance-driven framework with a more explicit set of requirements, while retaining and, in some areas, expanding the FSCA’s supervisory discretion.
The result is a hybrid regulatory model that combines defined rules – including targeted prohibitions – with case-by-case assessment and judgement, particularly in relation to public interest and the use of complex investment strategies.
The FSCA’s emphasis on principles-based regulation is also consistent with broader regulatory developments – particularly the Conduct of Financial Institutions Bill, which is expected to shift the regulation of financial services towards outcomes-based supervision.
