FSCA proposes to ease requirements for CIS portfolio amalgamations

The FSCA has published a draft notice setting out the conditions under which collective investment scheme (CIS) managers will be exempt from some of the requirements of the Collective Investment Schemes Control Act (Cisca) when funds are amalgamated.

Essentially, the exemption proposes that investors in the receiving portfolio will not have to be balloted, but they must be provided with an opportunity to object to the amalgamation and exit the portfolio.

Section 99 of Cisca provides that a CIS of two or more portfolios may not be amalgamated without the prior consent of investors. Also, the rights of the investors in a portfolio may not be ceded or transferred without the investors’ prior consent.

In a communication published on 11 July, the FSCA said members of the CIS industry have drawn attention to the difficulties that result from complying with the Authority’s requirement that investors in the targeted, or receiving, portfolio must be balloted when portfolios are amalgamated.

The industry has long held that the ballot requirement makes an amalgamation difficult, because the investors in the targeted portfolio are likely to be apathetic. Money is wasted in an attempt to ballot the investors, followed by a second ballot – although both ballots have little chance of success.

Last year, CIS managers and other stakeholders asked the FSCA to consider issuing an interpretation ruling in respect of section 99 of Cisca, because it has been subject to differing interpretations by industry stakeholders, the FSCA said in Communication 21 of 2022.

The FSCA remains of the view that section 99 requires that investors in an original scheme and investors in a targeted scheme must be balloted. However, the Authority has taken note that this requirement could lead to “undesirable outcomes” in some instances.

As a result, the FSCA said it has decided to address the problems raised by the industry, while protecting investors, by exempting CIS managers from some of the requirements of section 99(1) of Cisca provided certain conditions are met.

What the draft exemption proposes

The draft notice defines what is meant by a “targeted fund” and a “transferring fund” in the context of an amalgamation of two or more collective investment schemes, or two or more portfolios:

  • A “targeted fund” is the collective investment scheme or portfolio to which another collective investment scheme or portfolio is intended to be transferred.
  • A “transferring fund” is the collective investment scheme or portfolio that will be transferred to another collective investment scheme or portfolio.

It goes on to state that a manager is exempted from the requirement in section 99(1) to obtain investors’ prior consent when amalgamating two or more collective investment schemes, or two or more portfolios of a collective investment scheme, provided that:

  • A manager must, at least 30 working days before the amalgamation takes place, provide the targeted fund investors with a warning of the proposed amalgamation so that they may consider their options, and afford such investors an opportunity to object to the amalgamation in writing.
  • The warning must be transparent, in writing and provide appropriate and accurate information to the targeted fund’s investors concerning the amalgamation, to enable the investors to make an informed decision and to exercise their rights.
  • The investors in the targeted fund must be informed that any written objection to the proposed transaction must be sent to the auditors of the targeted fund tasked with the audit of the amalgamation.
  • The manager of the targeted fund must, upon completion of the amalgamation, verify through an audit report the value of the participatory interests of those investors in the targeted fund who objected to the amalgamation, and a copy of the auditors’ report must be submitted to the FSCA.
  • The assets that are transferred as part of the amalgamation must be of the same type, quality and liquidity as the assets in the collective investment scheme or portfolio receiving the transferred assets. Alternatively, assets in liquid form must be transferred and re-invested into the targeted fund within one month after the amalgamation.
  • The manager of the targeted fund must develop a plan as to how any illiquid assets will be dealt with, including any necessary disclosures related thereto, and must ensure that in implementing the plan, the fair treatment of investors is prioritised and not compromised.
  • The trustees of the targeted fund must agree that the receipt of the assets held in the targeted fund as a result of the amalgamation is not likely to result in any material prejudice to the fund’s investors, and that such receipt is consistent with the objective of the targeted fund and can be effected without any breach of the investment limits or the investment policy, including the limit on borrowing powers.

Deadline to comment

Comments on the draft exemption must be submitted on the comments template by 8 August to

To download the exemption, Communication 21 of 2022 (CIS) and the comments template, go to > Regulatory framework > Industry communication > Industry communication > CIS > FSCA communication.

For more information, email the Regulatory Frameworks Department at or

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