Page 23 - Profile's Unit Trusts and Collective Investments 2021 issue 2

Foreword

Foreword

Foreword
The last of the 25 recommendations of the Crypto Assets Regulatory Working Group
(CARWG) in their position paper of June this year is that the current stance of regulators – that
collective investment schemes and pension funds should not be allowed to hold crypto assets –
should be maintained.
CARWG also suggests that crypto assets should fall under the capital flows monitored by the
surveillance department of the SARB and that crypto assets should be declared financial products
under FAIS. A temporary measure that would require crypto asset service providers (CASPs) to
register as intermediaries, it would allow the FSCA to act against service providers who provide
intermediary services – especially where advice and recommendations are involved – that do not
serve the best interests of investors. The longer-term solution is to include crypto assets in FSRA
and COFI in order to allow full business conduct requirements to be imposed on all CASPs.
The process of including CASPs as accountable institutions under FICA is already underway.
When CASPs are included they will be subject to all of the FICA requirements, including the
anti-money laundering regulations and those aimed at combating the financing of terrorism.
CASPs will have to register, conduct customer identification and verification, monitor suspicious
activities, report cash transactions above R25 000, and so on.
Whether these steps will successfully protect investors is not clear. Two 2021 crypto scams in
South Africa – Mirror Trading International and Africrypt – reportedly cost investors $170 million
and $3.8 billion respectively. Safeguards are difficult when the underlying products have as core
features anonymity and untraceability.
As a store of value, crypto assets are unlike anything else. Tokens are not physical
commodities, not government-backed, not currency, not equity, not central bank money, not
commercial paper. Their value depends entirely on group perceptions of value. Holders of crypto
assets generally have no recourse when things go wrong. Only the bravest financial advisors will
venture into the crypto frontier once they are declared financial products.
Rampant Bulls
Meanwhile the COVID third wave has come and (more-or-less) gone and the world has
shrugged off lockdowns and travel restrictions and stock markets post new highs every week.
Strong results from US mega-caps have reduced the TTM P/Es of the major indices, although
multiples remain demanding.
Updates
As always, all chapter content has been updated with the latest market information and
industry developments. We have added a clarification of PAPIA, POPI's neglected cousin, included
a summary of the GCOC complaints procedure, and expanded the section on risk profiling.
Thank you for your ongoing support of
Profile's Unit Trusts & Collective Investments.
Feedback and suggestions are welcomed.
Don't forget to visit out companion website,
www.fundsdata.co.za – and a reminder that
you can now access the ebook version of this
publication at any time by scanning the QR
code on the title page or visiting
www.profile.co.za/uthb.

Nic Oldert
30 August 2021

21
Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts