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Financial Institutions (Protection of Funds) Act,2001 (Act No. 28 of 2001)

Copyright: This Act reproduced under Government Printers Copyright Authority 10154 dated 20 March 1996

www.acts.co.za

The Financial Institutions (Protection of Funds) Act, 2001, (Act No. 28 of2001) has been amended by Guidelines on the Conduct of Curators,Government Gazette 38550, Notice No. 56 of 2015, dated 6 March 2015.

3Contents

Table of Contents

Financial Institutions (Protection of Funds) Act, 2001 (ActNo. 28 of 2001) 6

................................................................................................................................... 6Introduction

................................................................................................................................... 61. Definitions

................................................................................................................................... 10Chapter 1 : Funds and Trust Property held by Financial Institutions

......................................................................................................................................................... 102. Duties of persons dealing with funds of, and with trust property

......................................................................................................................................................... 113. Declaration of interest

......................................................................................................................................................... 114. Investment of trust property

................................................................................................................................... 12Chapter 1A : On-Site Visits

......................................................................................................................................................... 124A. On-site visits

................................................................................................................................... 14Chapter 2 : Enforcement

......................................................................................................................................................... 155. Appointment of curator

......................................................................................................................................................... 165A. Statutory management

......................................................................................................................................................... 186. Powers of registrar

......................................................................................................................................................... 206A. Referral to enforcement committee

......................................................................................................................................................... 206B. Enforcement committee proceedings

......................................................................................................................................................... 216C. Hearing by enforcement committee

......................................................................................................................................................... 226D. Determination by enforcement committee

......................................................................................................................................................... 236E. Notification and enforcement of determination

......................................................................................................................................................... 246F. Appeal against determination

......................................................................................................................................................... 246G. Disclosure of determination

......................................................................................................................................................... 246H. Utilisation of administrative sanction

......................................................................................................................................................... 246I. Saving of rights

......................................................................................................................................................... 257. Declaration of certain practices as irregular or undesirable

......................................................................................................................................................... 268. Restriction on powers of registrar (Repealed)

......................................................................................................................................................... 269. Records and entries in books of account admissible in evidence

......................................................................................................................................................... 269A. Verification of information

......................................................................................................................................................... 2710. Offences

......................................................................................................................................................... 2711. Repeal of laws

......................................................................................................................................................... 2712. Status of footnote

......................................................................................................................................................... 2713. Transitional provision

......................................................................................................................................................... 2814. Short title

................................................................................................................................... 28Schedule

......................................................................................................................................................... 28Laws Repealed

................................................................................................................................... 28Board Notices

......................................................................................................................................................... 28Board Notice 56 of 2015

.................................................................................................................................................. 29Guidelines on the Conduct of Curators

.................................................................................................................................................. 291. Definitions

.................................................................................................................................................. 312. Purpose of Guidelines

.................................................................................................................................................. 313. General duties of curator

.................................................................................................................................................. 324. Conflict of interest

.................................................................................................................................................. 325. Investors

.................................................................................................................................................. 326. Statutory requirements and record keeping

.................................................................................................................................................. 337. Reporting to the registrar

.................................................................................................................................................. 348. Reporting to Court

.................................................................................................................................................. 349. Legal proceedings and forensic ...

.................................................................................................................................................. 3510. Remuneration of curators

.................................................................................................................................................. 3511. Statements of accounts and ...

.................................................................................................................................................. 3612. Settlement of legal proceedings

4Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001)

.................................................................................................................................................. 3613. Joint curatorship

.................................................................................................................................................. 3614. Transitional arrangements

.................................................................................................................................................. 3715. Short title and commencement

Keyword Index 39

Financial Institutions (Protection of Funds) Act, 2001 (ActNo. 28 of 2001)

www.acts.co.za

Copyright: This Act reproduced under Government Printers Copyright Authority 10154 dated 20 March 1996


Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28of 2001)

Introduction

Notice No. 123823 November 2001

(English text signed by the President.)(Assented to 12 November 2001.)

It is hereby notified that the President has assented to the following Act, which is herebypublished for general information:–

To provide for, and consolidate the laws relating to, the investment, safe custody andadministration of funds and trust property by financial institutions; to enable the registrar to

protect such funds and trust property; to repeal the Financial Institutions (Investment ofFunds) Act, 1984 (Act No . 39 of 1984); to improve the enforcement powers of the registrar; and

to provide for matters incidental thereto.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:-

1. Definitions

In this Act, unless the context indicates otherwise –

"administrative sanction"means a sanction contemplated in section 6D(2);[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"applicant"means the registrar or the directorate that refers a person to the enforcement committee;[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"board"means the Financial Services Board established by section 2 of the Financial Services BoardAct, 1990 (Act No. 97 of 1990);[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"company"includes a close corporation referred to in the Close Corporations Act, 1984 (Act No. 69 of1983);


"Companies Act"means the Companies Act, 2008 (Act No. 71 of 2008);[Definition inserted by section 156(a) of Act No. 45 of 2013]

"contravention"includes any non-compliance with any law;[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"determination"means the finding of the enforcement committee, the administrative sanction, the reasonsfor the imposition of such sanction and any ancillary order made by the enforcementcommittee under this Act;[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"directorate"means the Directorate of Market Abuse referred to in section 83 of the Securities ServicesAct, 2004 (Act No. 36 of 2004);[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"enforcement committee"means the enforcement committee established in terms of section 10(3) of the FinancialServices Board Act, 1990 (Act No. 97 of 1990);[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"financial institution"means-

a) any person or institution referred to in the definition of ‘financial institution’ insection 1 of the Financial Services Board Act, 1990 (Act No. 97 of 1990)1; or

b) any medical scheme contemplated in section 1 of the Medical Schemes Act, 1998(Act No. 131 of 1998);

"institution"for the purposes of sections 5, 6, 9 and 10, means–

a) a financial institution;b) any person, partnership, company or trust in which, or in the business of which,

a financial institution or an unregistered person has or had a direct or indirectinterest;

c) any person, partnership, company or trust which has or had a direct or indirectinterest in a financial institution or unregistered person, or in the business of afinancial institution or an unregistered person;

d) a participating employer in a pension fund organisation;e) any person, partnership, Company or trust that controls, manages or administers

the affairs or part of the affairs of a financial institution or an unregisteredperson; or

f) any unregistered person;


"law",for the purposes of

i) section 6, means -i) this Act;ii) the Financial Services Board Act, 1990;iii) the Inspection of Financial Institutions Act, 1998 (Act No. 80 of 1998);iv) the Financial Services Ombud Schemes Act, 2004 (Act No. 37 of 2004);v) an Act referred to in the definition of 'financial institution' in section 1 of

the Financial Services Board Act, 1990;vi) the Medical Schemes Act, 1998 (Act No. 131 of 1998);and any subordinate legislation, enactment or measure made under these Acts;

(aA) section 5A, means the Financial Intelligence Centre Act, 2001, (Act No. 38 of2001), and the Acts referred to in paragraph (a), including any subordinatelegislation, enactment or measure made under those Acts;[Subparagraph (aA) inserted by section 156(b) of Act No. 45 of 2013]

b) sections 6A to 6I, means the Acts referred to in paragraph (a)—i) including any subordinate legislation, enactment or measure made under

those Acts;ii) excluding—

aa) the Medical Schemes Act, 1998;bb) the Banks Act, 1990 (Act No. 94 of 1990)cc) the Mutual Banks Act, 1993 (Act No. 124 of 1993); anddd) the Co-operative Banks Act, 2007 (Act No. 40 of 2007);

[Subparagraph (b) amended by section 156(c) of Act No. 45 of 2013](c) Chapter 1A, means—

(i) a law referred to in paragraph (a) of the definition of 'financialinstitution' in section 1 of the Financial Services Board Act, 1990 (Act No.97 of 1990); and

(ii) this Act,including any subordinate legislation and an enactment or measure made underthose laws;[Subparagraph (c) amended by section 156(d) of Act No. 45 of 2013]

[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"nominee company"means a company, controlled by a financial institution, which—

a) is incorporated under the provisions of the Companies Act;b) has as a special condition contemplated in section 15(2) of the Companies Act

the requirement to act as nominee for, or representative of, any person in theholding of any property in trust for such person or persons;

c) is precluded as a special condition in its Memorandum of Incorporation fromincurring any liabilities other than to the persons on whose behalf it holdsassets, to the extent of their respective rights to, and interest in, such assets;and

d) has entered into an irrevocable written agreement with a financial institutionwhich controls the company, and in terms of which such financial institution hasundertaken to pay all the expenses of, and incidental to, its formation,operations and liquidation;

[Definition amended by section 156(e) of Act No. 45 of 2013]


"official web site"means a web site as defined in section 1 of the Electronic Communications and TransactionsAct, 2002 (Act No. 25 of 2002), set up by the board;[Definition inserted by section 156(f) of Act No. 45 of 2013]

"person"includes any institution, partnership or trust;[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"registrar"means-

a) the registrar as defined in any of the Acts referred to in paragraph (a) of thedefinition of ‘financial institution’ in section 1 of the Financial Services BoardAct, 1990;

b) the executive officer defined in section 1 of the Financial Services Board Act,1990; or

c) except for the purposes of sections 6A to 6I, the registrar of medical schemesreferred to in section 1 of the Medical Schemes Act, 1998;

[Definition amended by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"respondent"means any person identified by the registrar or the directorate as having allegedlycontravened a law;[Definition inserted by section 41 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

"trust property"means any corporeal or incorporeal, movable or immovable asset invested, held, kept insafe custody, controlled, administered or alienated by any person, partnership, company ortrust for, or on behalf of, another person, partnership, company or trust, and such otherperson, partnership, company or trust is hereinafter referred to as the principal;

"unregistered person"means any person, partnership, company or trust not registered, approved or otherwiseauthorised by the registrar under a relevant law to carry on the business of a financialinstitution, but who or which carries on such business or a business corresponding to abusiness normally carried on by a financial institution.

1 In terms of section 1 of the Financial Services Board Act, 1990, a "financial institution" is definedas –"a)

i) any pension fund organisation registered in terms of the Pension Funds Act, 1956 (ActNo. 24 of 1956). or any person referred to in section 13B of that Act administering theinvestments of such a pension fund or the disposition of benefits provided for in therules of such a pension fund;

ii) any friendly society registered in terms of the Friendly Societies Act, 1956 (Act No. 25of 1956), or any person in charge of the management of the affairs of such a society;

i i i) any ‘unit trust scheme’ as defined in section 1 of the Unit Trusts Control Act, 1981


(Act No. 54 of 1981), or any management company or trustee in relation to such ascheme;

iv) any ‘scheme’ as defined in section 1 of the Participation Bonds Act, 1981 (Act No. 55of 1981), or any manager or nominee company in relation to such a scheme;

v) any ‘stock exchange’, ‘member’ or ‘stockbroker’ as defined in section 1 of the StockExchanges Control Act, 1985 (Act No. 1 of 1985), or any person referred to in section4(1) of that Act managing investments as contemplated in that section;

vi) any ‘financial exchange’, ‘member’ or ‘recognised clearing house’ as defined insection 1 of the Financial Markets Control Act, 1989 (Act No. 55 of 1989), or anyperson referred to in section 5( 1) of that Act managing investments as contemplatedin that section;

vii) any ‘registered insurer’ as defined in section 1(1) of the Insurance Act, 1943 (Act No.27 of 1943);

vii i) any agent, broker or other person contemplated in section 20bis of the Insurance Act,1943;

ix) any person deemed, in terms of section 60 of the Insurance Act, 1943, to be carryingon insurance business in the Republic;

x) any person rendering or who is to render services contemplated in section 23A(1) ofthe Insurance Act, 1943;

xi) any ‘central securities depository’ or a ‘depositary institution’ as defined in section1 of the Safe Deposit of Securities Act, 1992 (Act No. 85 of 1992), or any member ofsuch a securities depository;

b)i) a bank as defined in section 1 (1) of the Banks Act, 1990 (Act No. 94 of 1990), or a

mutual bank as defined in section l(1) of the Mutual Banks Act, 1993 (Act No. 124 of1993), which deals with trust property as a regular feature of its business; or

ii) any other person who or which deals with trust property as a regular feature of his,her or its business, but who is not registered, l icensed, recognised, approved orotherwise authorised to deal so in terms of any Act, other than the Companies Act,1973 (Act No. 61 of 1973), the Close Corporations Act, 1984 (Act No. 69 of 1984), andthe Trust Property Control Act, 1988 (Act No. 57 of 1988);"

Chapter 1 : Funds and Trust Property held by Financial Institutions

2. Duties of persons dealing with funds of, and with trust property controlled by, financialinstitutions3. Declaration of interest4. Investment of trust property

2. Duties of persons dealing with funds of, and with trust property

A financial institution or nominee company, or director, member, partner, official, employeeor agent of the financial institution or nominee company, who invests, holds, keeps in safecustody, controls, administers or alienates any funds of the financial institution or any trustproperty –

a) must, with regard to such funds, observe the utmost good faith and exerciseproper care and diligence;

b) must, with regard to the trust property and the terms of the instrument oragreement by which the trust or agency in question has been created,observe the utmost good faith and exercise the care and diligence requiredof a trustee in the exercise or discharge of his or her powers and duties; and


c) may not alienate, invest, pledge, hypothecate or otherwise encumber ormake use of the funds or trust property or furnish any guarantee in a mannercalculated to gain directly or indirectly any improper advantage for any person to the prejudice of the financial institution or principal concerned.

[Section 2 amended by section 157(a) and (b) of Act No. 45 of 2013]

3. Declaration of interest

1) A director, member, partner, official, employee or agent of a financial institution orof a nominee company who takes part in a decision to invest any of the funds of thefinancial institution or any trust property in a company or other undertaking in whichhe or she has a direct or indirect financial interest, must declare that interest inwriting to the board of management or other governing body of the financialinstitution or nominee company, indicating the nature and extent of such interest,before such decision is made.

2) For the purposes of subsection (1), ‘invest’ includes –a) the purchase of shares in a company, or of an interest in a close corporation

or partnershipb) the granting of a secured or unsecured loan.c) acquiring a financial interest in an agreement or other matter in which the

financial institution or nominee company has a material interest.[Subsection 2 amended by section 158 of Act No. 45 of 2013]

3) A declaration of interest made in terms of subsection (1) must be recorded in theminutes of the meeting of the board or governing body at which the declaration ismade or considered.

4. Investment of trust property

1) A financial institution or nominee company, or director, member, partner, official,employee or agent of a financial institution or nominee company which administerstrust property under any instrument or agreement may not cause such trust propertyto be invested otherwise than in a manner directed in, or required by, suchinstrument or agreement.[Subsection 1 amended by section 159(a) of Act No. 45 of 2013]

2) In the absence of a direction or requirement referred to in subsection (1), a financialinstitution or nominee company, or director, member, partner, official, employee oragent of the financial institution or nominee company, may not cause any trustproperty to be invested otherwise than in the name of –a) the principal concerned;b) the financial institution in its capacity as administrator, trustee, curator or

agent; or c) a nominee company.


[Subsection 2 amended by section 159(b) of Act No. 45 of 2013]

3)a) Despite subsections (1) and (2) –

i) where the Memorandum of Incorporation of a company has a specialcondition under section 15(2) of the Companies Act which prohibitsthe registration of its shares or debentures in the name of –[Subparagraph (i) amended by section 159(c) of Act No. 45 of 2013]aa) a trust;bb) a financial institution in its capacity as administrator, trustee

or curator; orcc) any nominee; and

ii) where such shares or debentures form part of trust propertyadministered by a financial institution

those shares or debentures must be registered in the name of a director,member, partner or manager of that financial institution.

b) The director, member, partner or manager must hold those shares ordebentures in a fiduciary capacity on behalf of the principal concerned.

c) Prior to the registration of any shares or debentures in the name of a director,member, partner or manager as contemplated in paragraph (a), the financialinstitution concerned must furnish security to the satisfaction of the Masterof the High Court, if such security has not already been furnished in terms ofthe Trust Property Control Act, 1988 (Act No. 57 of 1988).

4) A financial institution must keep trust property separate from assets belonging tothat institution, and must in its books of account clearly indicate the trust property asbeing property belonging to a specified principal.

5) Despite anything to the contrary in any law or the common law, trust propertyinvested, held, kept in safe custody, controlled or administered by a financialinstitution or a nominee company under no circumstances forms part of the assets orfunds of the financial institution or such nominee company.

6) This section also applies in a case where a financial institution invests, holds, keepsin safe custody, controls, administers or alienates trust property under anyinstrument or agreement jointly with another person.

Chapter 1A : On-Site Visits

4A. On-site visits

4A. On-site visits

(1) In this Chapter—

"business document" means a document that—


(a) relates to the carrying on of a regulated activity; or(b) may reasonably be required for purposes of an on-site visit;

"business premises" means a building or part of a building that is used in connectionwith the carrying on of a regulated activity;

"document" includes books, records, securities or accounts and any information,including information stored, transmitted or recorded electronically, digitally,photographically, magnetically, optically or in any other intangible form;

"on-site visit" means a visit at the business premises of a regulated person—(a) to determine compliance with a law; or(b) aimed at the overarching supervision of a regulated activity or regulated

persons;

"outsource" means an arrangement of any form between persons referred to in thedefinition of a 'regulated person' in terms of which a person referred to in paragraph(b) of the definition of 'regulated person' performs a regulated activity which wouldotherwise be performed by a person referred to in paragraph (a) of the definition of'regulated person' itself;

"regulated activity" means any activity or a part of that activity regulated under a law;and

"regulated person" means a person—(a) that is authorised, licensed, registered, appointed or otherwise approved to

perform an activity regulated under a law;(b) to whom a person referred to in paragraph (a) has outsourced the performance

of a regulated activity.

(2) The Registrar may conduct an on-site visit and such visit must be conducted with strictregard to decency and good order.

(3) The Registrar when conducting an on-site visit in terms of subsection (2) has a right ofaccess to any business document and may—(a) at any time during business hours—

(i) enter a regulated person's business premises and such person must,upon request, provide any business document;

(ii) examine, make extracts from and copy any business document;(iii) question any person the registrar believes may have information

relevant to the on-site visit;(iv) where a contravention of a law has been detected—

(aa) issue an instruction prohibiting the removal or destruction ofany business document; or

(bb) against a receipt, remove any business document to prevent itsconcealment, removal, dissipation or destruction until thecompletion of any proceedings or regulatory action;

(b) instruct the regulated person to produce at a specified time and place and inthe manner determined by the registrar—(i) any specified business document or a business document of a

specified description in the possession or under the control of the


regulated person; or(ii) furnish the registrar with information in respect of that business

document; and(c) instruct any person that is in possession or has under his or her or its control

any business document relating to the business of the regulated person to—(i) produce that business document; or(ii) furnish the registrar with information in respect of that business

document,at a specified time, place and in the manner determined by the registrar.

(4) A regulated person may, during normal office hours and under the supervision of theregistrar, examine and make extracts from any document removed under subsection(3)(a)(iv).

(5) Subsection (3) shall not be construed so as to infringe upon the common law right toprofessional privilege between an attorney and his or her client in respect ofinformation communicated to the attorney, whether in writing or verbally, so as toenable him or her to provide advice, or render other legal assistance to or defend theclient in connection with an offence under any law with which he or she is charged, inrespect of which he or she has been arrested or summoned to appear in court or inrespect of which an investigation with a view to instituting criminal proceedings isbeing conducted against him or her.

[Section 4A inserted by section 160 of Act No. 45 of 2013]

Chapter 2 : Enforcement

5. Appointment of curator5A. Statutory management6. Powers of registrar6A. Referral to enforcement committee6B. Enforcement committee proceedings6C. Hearing by enforcement committee6D. Determination by enforcement committee6E. Notification and enforcement of determination6F. Appeal against determination6G. Disclosure of determination6H. Utilisation of administrative sanction6I. Saving of rights7. Declaration of certain practices as irregular or undesirable8. Restriction on powers of registrar (Repealed)9. Records and entries in books of account admissible in evidence9A. Verification of information10. Offences11. Repeal of laws12. Status of footnote13. Transitional provision14. Short title


5. Appointment of curator

1) The registrar may, on an ex parte basis, apply to a division of the High Court havingjurisdiction for the appointment of a curator to take control of, and to manage thewhole or any part of, the business of an institution.[Subsection 1 amended by section 161(a) of Act No. 45 of 2013]

2) Upon an application in terms of subsection (1) the court may –a) on good cause shown, provisionally appoint a curator to take control of, and

to manage the whole or any part of, the business of the institution on suchconditions and for such a period as the court deems fit; and[Subparagraph (a) amended by section 161(b) of Act No. 45 of 2013]

b) simultaneously grant a rule nisi calling upon the institution and otherinterested parties to show cause on a day mentioned in the rule why theappointment of the curator should not be confirmed.

3) On application by the registrar or the institution the court may anticipate the returnday if not less than 48 hours’ notice of such application has been given to the otherparty.[Subsection 3 amended by section 161(c) of Act No. 45 of 2013]

4) If at the hearing pursuant to the rule nisi the court is satisfied that it is desirable to doso, it may confirm the appointment of the curator.

5) The court may, for the purposes of a provisional appointment in terms of subsection(2)(a) or a final appointment in terms of subsection (4), make an order with regard to–a) the suspension of legal or foreclosure proceedings against the institution for

the duration of the curatorship;(aA) the authority of the curator to investigate the affairs of the institution or any

associated entity;b) the powers and duties of the curator;c) the remuneration of the curator;d) the costs relating to any application made by the registrar;e) the costs incurred by the registrar in respect of an inspection of the affairs of

the institution concerned in terms of the Inspection of Financial InstitutionsAct, 1998 (Act No. 80 of 1998);

(eA) the method of service or publication of the order; orf) any other matter which the court deems necessary.[Subsection 5 amended by section 161(d) of Act No. 45 of 2013]

6) The curator acts under the control of the registrar who made the application undersubsection (1) and in accordance with guidelines prescribed by the registrar by noticein the Gazette, and the curator may apply to that registrar for instructions with regardto any matter arising out of, or in connection with, the control and management ofthe business of the institution.[Subsection 6 amended by section 161(e) of Act No. 45 of 2013]


7) The curator must furnish the registrar concerned with such reports or informationconcerning the affairs of the institution as the registrar may require.[Subsection 7 amended by section 161(e) of Act No. 45 of 2013]

8)a) Any person, on good cause shown, may make application to the court to set

aside or alter any decision made, or any action taken, by the curator or theregistrar with regard to any matter arising out of, or in connection with, thecontrol and management of the business of an institution which has beenplaced under curatorship.

b) A person who makes application contemplated in paragraph (a) must givenotice of not less than 48 hours of such application to the registrar or thecurator, as the case may be, and the registrar or curator is entitled to be heardat such application.

[Subparagraph (b) amended by section 161(f) of Act No. 45 of 2013]

9) The court may, on good cause shown, cancel the appointment of the curator at anytime.

10) Despite subsections (1) to (9), the registrar may on good cause, by agreement with aninstitution and without the intervention of the court, appoint a curator for thepurpose set out in subsection (1).[Subsection 10 inserted by section 161(g) of Act No. 45 of 2013]

11) The terms of the appointment contemplated in subsection (10) must be set out in aletter of appointment issued by the registrar to the curator and—(a) must include—

(i) the powers and duties of the curator; and(ii) the remuneration of the curator; and

(b) may include any other matter agreed upon between the registrar and theinstitution.

[Subsection 11 inserted by section 161(g) of Act No. 45 of 2013]

12) The rights of any creditor or client of the institution are not affected by theappointment of a curator in terms of subsection (10).[Subsection 12 inserted by section 161(g) of Act No. 45 of 2013]

13) Subsections (6) and (7) apply to an appointment in terms of subsection (10).[Subsection 13 inserted by section 161(g) of Act No. 45 of 2013]

14) An appointment in terms of subsection (10) lapses—(a) if the registrar after consultation with the curator withdraws the letter of

appointment; or(b) by order obtained at the instance of the institution in terms of subsection (9).[Subsection 14 inserted by section 161(g) of Act No. 45 of 2013]

5A. Statutory management

(1) Despite any other law, the registrar may, by agreement with a financial institution and


without the intervention of a court, appoint a statutory manager for that financialinstitution, if it appears that—(a) the financial institution—

(i) has in a material respect failed to comply with a law;(ii) is likely to be in an unsound financial position; or(iii) is maladministered; and(b) it is advisable to appoint a statutory manager in order to protect—(i) the interests of the clients of the financial institution;(ii) the safety and soundness of financial institutions in general; or(iii) the stability, fairness, efficiency and orderliness of the financial

system.

(2) An appointment under subsection (1) takes effect immediately, but the registrar must,as soon as practicable, after the appointment and in any event within 30 days after theappointment, apply to the High Court for an order confirming the appointment.

(3) On hearing the application in terms of subsection (2), the court must confirm theappointment, unless satisfied that the grounds for making the appointment no longerexist.

(4) The statutory manager of a financial institution—(a) must be allowed full access to the accounting records, financial statements

and other information relating to the affairs of the financial institution;(b) must participate in the management of the affairs of the financial institution

with its executive directors or managers: Provided that where there isdisagreement between the statutory manager and the executive directors ofthe financial institution, the statutory manager shall take the final decision;and

(c) is entitled to receive such remuneration form the institution as the Court mayorder.

(5)(a) The statutory manager of a financial institution and the financial institution

must manage the affairs of the institution with the greatest economy possiblecompatible with efficiency and, as soon as practicable, report to the registrarand indicate what steps should be taken to ensure that the financial institution—(i) complies with the law;(ii) becomes financially sound; and(iii) is properly administered.

(b) if the statutory manager considers that it is not practicable to take steps interms of paragraph (a), he or she must report to the registrar and must indicate—(i) whether steps should be taken to transfer the financial services

business or a part thereof of the financial institution to an appropriateperson and, if so, on what terms; or

(ii) whether the financial institution should be wound up or placed undercuratorship.

(6) The statutory manager of a financial institution and the financial institution mustcomply with directives issued by the registrar from time to time in relation to the


statutory manager's functions and report to the registrar should the statutory managerbe hindered in giving effect to any such directives.

(7) The statutory manager of a financial institution and the financial institution may, aftergiving notice to the registrar, at any time apply to the court for directions.

(8) The registrar may at any time apply to the court to—(a) terminate the statutory management; or(b) remove a statutory manager from office and, subject to subsection (2), to

confirm the appointment of a replacement.

(9) The statutory manager of a financial institution is not liable for loss suffered by thefinancial institution unless it is established that the loss was caused by the statutorymanager's fraud, dishonesty or wilful failure to comply with the law.

(10) The provisions of this section must not be construed as limiting any of the powers ofthe registrar under section 5.


6. Powers of registrar

1) The registrar may institute proceedings in the High Court having jurisdiction in orderto –a) discharge any duty or responsibility imposed on the registrar in terms of any

law;b) compel any institution to comply with any law or to cease contravening a law;c) compel any institution to comply with a lawful request, directive or

instruction made, issued or given by the registrar under a law;d) obtain a declaratory order relating to any law or the business of an institution;e) prevent the concealment, removal, dissipation or destruction of assets or

evidence thereof by any institution;f) seize and remove the assets of an institution for safe custody pending the

exercising of such other legal remedy as may be available to the registrar.[Subsection 1 amended by section 163(a) and (b) of Act No. 45 of 2013]

2) For the purpose of ensuring compliance with a law, or if the registrar has reason tobelieve that an institution is contravening or failing to comply with, or hascontravened or failed to comply with, any provision of a law, the registrar may –a) by notice direct that institution to –

i) furnish the registrar within a specified period with any specifiedinformation or documents in the possession or under the control ofthat institution and which relate to the matter of such contraventionor failure;

ii) appear before the registrar at a specified time and place forquestioning by the registrar in connection with such matter;

iii) make arrangements to the satisfaction of the registrar for thedischarge of all or any part of that institution’s obligations in terms ofsuch law;


b) if it appears that prejudice has occurred or might occur as a result of suchcontravention or failure to comply, by notice prohibit such institution fromcontinuing business or dealing with trust property pending an application tocourt by the registrar as contemplated in section 5, or pending the exercisingof such other legal remedy as may be available to the registrar.

[Subsection 2 amended by section 163(c) of Act No. 45 of 2013]

3)a) If the registrar has reason to believe that a person has contravened a law, or

has failed to comply with a request, directive or instruction made, issued orgiven by the registrar under such law, the registrar may publish a statement tothat effect in such manner as the registrar considers appropriate.

b) Before publishing a statement, the registrar must give the person concerned anotice warning it of the proposed publication of such statement, the reasontherefor and the proposed date of publication.

c) The person concerned may before the proposed date of publication of thestatement make representations to the registrar concerning the proposedaction.

d) If the registrar thereafter decides to publish the statement, the registrarmust, without delay, give the person concerned a notice which sets out theterms of the statement to be published.

4)(a) The registrar may accept an undertaking by a person to do something or to

refrain from doing something in connection with a matter regarding which theregistrar has a function or power.

(b) The person may withdraw or vary the undertaking at any time, but only withthe registrar's consent.

(c) If the registrar considers that the person who gave the undertaking hasbreached a term of the undertaking, the registrar may apply to the High Courtfor an order under paragraph (d).

(d) If the court is satisfied that the person has breached a term of the undertaking,the court may make—

(i) an order directing that person to comply with that term of theundertaking; or

(ii) any other order the court considers appropriate.[Subsection 4 inserted by section 163(d) of Act No. 45 of 2013]

5) The registrar may take any reasonable steps, including the issue of an instruction tocarry out an inspection in terms of the Inspection of Financial Institutions Act, 1998,to ensure that an institution which is subject to an order of court made in terms ofsubsection (1) or (2) is complying with that order.

(6)(a) The notification of anything done by the registrar may be by notice on the

official web site.(b) Notification under paragraph (a) does not affect any obligation of the registrar

to publish by notice in the Gazette.[Subsection 6 inserted by section 163(e) of Act No. 45 of 2013]


6A. Referral to enforcement committee

1)a) Despite anything to the contrary in any other law, if a registrar is of the opinion

that a person has contravened a provision of a law in respect of which theregistrar is not authorised to impose a penalty or a fine, the registrar may referthe alleged contravention to the enforcement committee.

b) The board may authorise a registrar to impose any sanction that the board isauthorised to impose under the Financial Intelligence Centre Act, 2001 (Act No.38 of 2001).

[Subsection 1 amended by section 164 of Act No. 45 of 2013]

2) The directorate may, after an investigation carried out by the directorate under ChapterX of the Financial Markets Act, 2012, refer an alleged contravention to the enforcementcommittee.

[Subsection 6A(2) amended by section 111 of the Financial Markets Act, 2012 (Act No. 19 of2012)]

6B. Enforcement committee proceedings

1) A referral under section 6A(1) or (2) must be accompanied by—a) a notice setting out the details and nature of the alleged contravention; and

[Subparagraph (a) amended by section 165(a) of Act No. 45 of 2013]b) an affidavit by or on behalf of the applicant setting out the facts and

documents supporting the notice.

2) The applicant must, on referral of a matter under section 6A( 1) or ( 2 )—a) cause a copy of the notice and affidavit referred to in subsection (1) to be

delivered to the respondent's residential address, registered office orprincipal place of business; and

b) afford the respondent the opportunity to submit an answering affidavit within30 days of delivery of the notice and affidavit to the respondent.

3) Any answering affidavit by or on behalf of the respondent must—a) be filed by the respondent with the enforcement committee and a copy

thereof must be delivered to the applicant;b) state which of the allegations of the applicant are admitted and which are

denied and, if denied, the respondent's version of the relevant facts.

4) Within 30 days of delivery to the applicant of the respondent's answering affidavit, theapplicant may deliver a replying affidavit in the manner slated in subsection (2)(a) orat another address elected by the respondent for such service.

5) No further affidavits may be filed without the permission of the enforcementcommittee.


6) The applicant that referred a matter may at any time withdraw a referral undersubsection (1) or (2) on notice to the enforcement committee and the respondent.

7)a) The applicant may, prior to the referral of a matter to the enforcement

committee or during or after the enforcement committee proceedings, enterinto a written settlement agreement with the respondent.

b) The agreement must be filed with the chairperson or deputy chairperson ofthe enforcement committee to be made an order of the enforcementcommittee, as contemplated in section 6D(2).[Subparagraph (b) amended by section 165(b) of Act No. 45 of 2013]

(8)(a) The chairperson of the panel designated by the enforcement committee to

hear a matter contemplated in subsection (2) may, on the written request of aparty and on good cause shown, extend the time period to file such affidavit.

(b) A written request contemplated in paragraph (a) must be filed with thechairperson on or before the expiry date within which to file the relevantaffidavit.

(c) A party seeking an extension of time must first approach the other party andthe written request must indicate whether the parties have agreed to anextension.

[Subsection 8 inserted by section 165(c) of Act No. 45 of 2013]

[Section 6B inserted by section 43 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

6C. Hearing by enforcement committee

1) The enforcement committee must inform the applicant and respondent of the date,time and place of the hearing, which must not be less than 30 days after the expiry ofthe time periods for the filing of the affidavit referred to in section 6B(2), or 6B(4) ifapplicable.[Subsection 1 amended by section 166(a) of Act No. 45 of 2013]

2) The applicant and respondent must not be given less than 30 days notice of the date ofthe hearing.

3) Where a matter cannot properly be decided on affidavit, in exceptional circumstancesand when it is necessary to come to a just decision, the enforcement committee mayorder any person to appear before the panel to be examined and cross-examined as awitness and to produce a document specified in the summons.[Subsection 3 amended by section 166(b) of Act No. 45 of 2013]

4) Subject to this section the chairperson of the panel designated to hear a matterdetermines the procedure for the hearing.

5) Without derogating from the generality of subsection (4), the chairperson may—


a) in an urgent matter order that such matter be disposed of at such time, in suchmanner and in accordance with such procedure as the chairperson deemsappropriate;

b) with the consent of the parties, rule that a matter may be presented to theenforcement committee by way of a stated case, abbreviated pleadings or anyother procedure which will expedite the matter;

c) rule on the discovery and inspection of documents;d) require heads of argument to be filed by the parties;e) allow legal representation to the parties; orf) order that the issues be argued before the enforcement committee.

[Section 6C inserted by section 43 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

6D. Determination by enforcement committee

1) The enforcement committee must determine whether the respondent hascontravened a law.

2) If the enforcement committee is satisfied on a balance of probabilities that there wasa contravention as contemplated in subsection (1) the enforcement committee may,despite the provisions of any law. impose any one or more of the followingadministrative sanctions:a) Impose a penalty by ordering the respondent to pay a sum of money to the

board; andb)

i) order the respondent, other than a respondent referred to insubparagraph (ii), to pay to any person who suffered patrimonial lossor damage as a result of the contravention of a law a compensatoryamount determined by the enforcement committee to make good thepatrimonial loss or damage so suffered; or

ii) if the respondent contravened section 78 of the Financial Markets Act,2012, order the respondent to pay to the board an amount calculated inaccordance with section 82 of that Act.

[Subsection 2 amended by section 167(a) of Act No. 45 of 2013]

3) When determining an appropriate administrative sanction, the enforcementcommittee may have regard to the following factors:a) The nature, duration, seriousness and extent of the contravention;b) any loss or damage suffered by any person as a result of the contravention;c) the extent of the profit derived or loss avoided by the respondent from the

contravention;d) the impact which the respondent's conduct may have on the relevant sector of

the financial services industry;e) whether the respondent has previously failed to comply with a fiduciary duty

or law;f) any previous fine imposed or compensation paid for the contravention based

on the same set of facts;g) the deterrent effect of the administrative sanction;


h) the degree to which the respondent co-operated with the applicant and theenforcement committee; and

i) any other factor, including mitigating factors submitted by the respondent,that the enforcement committee considers to be relevant.

4)a) A determination of a panel on a matter assigned to it must be in writing and

must state the reasons for the determination.b) The decision of a majority of the members of a panel is a determination of the

enforcement committee.

5) The enforcement committee may as part of a determination make such order as to—(a) costs as it may deem suitable and fair, including the cost of constituting the

enforcement committee panel and all expenses reasonably incurred by theapplicant in investigating the alleged non-compliance and referring the matterto the enforcement committee; and

(b) the payment of interest on any amount contemplated in subsections (2) and(5)(a) at the rate prescribed in terms of section 1(2) of the Prescribed Rate ofInterest Act, 1975 (Act No. 55 of 1975).

[Subsection 5 amended by section 167(b) of Act No. 45 of 2013]

[Section 6D amended by section 111 of the Financial Markets Act, 2012 (Act No. 19 of 2012)]

6E. Notification and enforcement of determination

1) As soon as the enforcement committee has issued a determination it must—a) cause a copy of the determination to be delivered to the applicant and the

respondent at the address stated in section 6B(2)(a) or any other address electedby the respondent—;i) by hand delivery;ii) by facsimile transmission or electronic means to a number or electronic

address furnished by the resondent: Provided that a confirmatory copy ofthe determination is sent by ordinary mail or by other suitable methodwithin one day of such facsimile or electronic transmission; or

iii) by prepaid registered post; and[Subsection 1 amended by section 168 of Act No. 45 of 2013]

2) A determination by the enforcement committee has legal force as if made by the HighCourt, and if the respondent fails to comply with the notice in terms of subsection (1 )(b) and an appeal has not been noted, the applicant may forthwith file with the registrarof a competent court a certified copy of the notice and the determination, and thedetermination thereupon has the effect of a civil judgment and may be enforced as iflawfully given in that court in favour of the applicant.

[Section 6E inserted by section 43 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]


6F. Appeal against determination

1) A determination of the enforcement committee may be taken on appeal to the HighCourt as if the determination were a decision of a magistrate in a civil matter.

[Subsection 1 amended by section 169 of Act No. 45 of 2013]

2) The launching of appeal proceedings does not suspend the operation or execution of adetermination, unless the chairperson of the enforcement committee which dealt withthe matter directs otherwise.

[Section 6F inserted by section 43 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

6G. Disclosure of determination

1) A determination of the enforcement committee must be made public by the registrar orthe directorate in a manner deemed appropriate by him or her.

2) Subsection (1) equally applies to any judgment on appeal or a settlement agreementmade an order in terms of section 6B(7)(b).

[Section 6G inserted by section 43 of the Financial Services Laws General Amendment Act,2008 (Act No. 22 of 2008)]

6H. Utilisation of administrative sanction

1) Any payment received by the board pursuant to an administrative sanction imposedunder section 6D(2)(a) must, after recovering costs, and subject to subsections (2),exclusively be utilised for purposes of consumer education or the protection of thepublic.[Subsection 1 amended by section 170 of Act No. 45 of 2013]

2) A compensatory amount received pursuant to an order under section 6D(2)(b)(ii) mustbe dealt with in accordance with section 82(4) to (7) of the Financial Markets Act, 2012.

[Section 6H amended by section 111 of the Financial Markets Act, 2012 (Act No. 19 of 2012)]

6I. Saving of rights

1) Subject to subsection (2), no provision of this Act, whether it relates to civil or criminalmatters, and no act performed under any such provision, may be construed as limiting


any right of a person affected by the contravention to seek appropriate legal redress interms of the common law or any other statutory law.

2) If a court assesses the penalty to be imposed on a person convicted of an offence interms of any law, the court must take into account any administrative sanction imposedin respect of the same set of facts.

3) An administrative sanction imposed by the enforcement committee does not constitutea previous conviction as contemplated in chapter 27 of the Criminal Procedure Act, 1977(Act No. 51 of 1977).

[Section 6I inserted by section 43 of the Financial Services Laws General Amendment Act, 2008(Act No. 22 of 2008)]

7. Declaration of certain practices as irregular or undesirable

1)(a) The registrar may, by notice in the Gazette, declare a specific practice or

method of conducting business an ‘irregular or undesirable practice’ or an‘undesirable method of conducting business’ for a specific category orcategories of financial institutions, or for all such institutions.

(b) In determining whether or not a declaration contemplated in paragraph (a)should be made, the registrar must be guided by whether the practiceconcerned has or is likely to have the effect of—(i) harming the relations between financial institutions or any category

of financial institutions, or any financial institution and clients or thegeneral public;

(ii) unreasonably prejudicing any client;(iii) deceiving or misleading any client; or(iv) unfairly affecting any client,and whether, if the practice is allowed to continue, one of more objects of

the law in question will, or are likely to, be defeated.[Subsection 1 amended by section 171 of Act No. 45 of 2013]

2) The registrar may not issue a declaration referred to in subsection (1) unless theregistrar –a) has invited interested persons to make written representations concerning the

intended declaration so as to reach him or her within 21 days before theproposed date of publication of that notice; and

b) has consulted with any advisory committee or board established in respect ofthe supervision, regulation and control of the financial institutions concerned.

3) A financial institution may not, on or after the date of the notice referred to insubsection (1), carry on the relevant business practice or method of conductingbusiness.

4) The registrar may, by notice in the Gazette, direct a financial institution which carrieson the relevant business practice or method of conducting business on or after thedate of the notice referred to in subsection (1), to rectify or repair to the satisfaction of


the registrar anything which was caused by, or arose out of, that business practice ormethod of conducting business: Provided that the Registrar may not make an ordercontemplated in section 6D(2)(b).[Subsection 4 amended by section 44 of the Financial Services Laws GeneralAmendment Act, 2008 (Act No. 22 of 2008)]

5) A financial institution which is directed to rectify or repair anything in terms ofsubsection (4), must do so within 60 days after the financial institution is so directed.[Subsection 5 amended by section 44 of the Financial Services Laws GeneralAmendment Act, 2008 (Act No. 22 of 2008)]

8. Restriction on powers of registrar (Repealed)

[Section 8 repealed by Section 111 of the Financial Markets Act, 2012]

9. Records and entries in books of account admissible in evidence

In any proceedings conducted in terms of this Act, the records and books of account of an institution, a nominee company or a trust administered by such institution are admissible asprima facie evidence of the matters, transactions and accounts recorded therein, if supportedby an affidavit by a person who alleges in that affidavit that person –

a)i) the person is a director, member, partner, official, employee or agent

of such institution, nominee company or trust; orii) the person is an inspector appointed under the Inspection of Financial

Institutions Act, 1998 (Act No. 80 of 1998), section 11 or 12 of the SouthAfrican Reserve Bank Act, 1989 (Act No. 90 of 1989), section 6 of theBanks Act, 1990 (Act No. 94 of 1990), or section 4 of the Mutual BanksAct, 1993 (Act No. 124 of 1993); and

b) such records or books of account are or have been the ordinary records andbooks of account of that institution, company or trust.

9A. Verification of information

Before making a determination in accordance with any law as to whether or not a person is fitand proper to hold office or continue to hold office in a financial institution, the registrar mayrequest for the verification of information or may verify information at the registrar's disposalby making enquiries to any state department, credit bureau or other source of relevantinformation concerning that person.



10. Offences

1) A person who contravenes or fails to comply with any provision of Chapter 1 is guilty ofan offence and on conviction liable to a fine not exceeding R10 million or toimprisonment for a period not exceeding 10 years, or to both such fine and suchimprisonment.[Subsection 1 amended by section 174 of Act No. 45 of 2013]

2) A court may, in addition to any penalty it may impose in terms of subsection (1), orderthat such person –a) pay the institution or principal concerned any profit he or she made; andb) compensate the institution or principal concerned for any damage suffered, as a

result of the contravention or failure.

3) A court may, in addition to any penalty imposed in terms of subsection (1) and anorder made in terms of subsection (2), order that such person may not serve as adirector, member, partner or manager of any financial institution for such period asthe court may deem fit.

11. Repeal of laws

The laws mentioned in the Schedule are hereby repealed to the extent set out in the thirdcolumn of the Schedule, subject to the provisions of section 13.

12. Status of footnote

1) The footnote in section 1 has been inserted for ease of reference to the definition of‘financial institution’ in section 1 of the Financial Services Board Act, 1990 (Act No. 97of 1990).

2) The footnote is not part of this Act and does not have the force of law.

13. Transitional provision

Anything done or deemed to have been done under any provision of a law repealed bysection 11 and which could be done under a provision of this Act, is deemed to have beendone under the last-mentioned provision.


14. Short title

This Act is called the Financial Institutions (Protection of Funds) Act, 2001.

Schedule

Laws Repealed

Laws Repealed

Number and year of law Short title Extent of repeal

Act No. 39 of 1984 Financial Institutions(Investment of Funds) Act,1984

The whole

Act No. 6 of 1987 Financial InstitutionsAmendment Act, 1987

Sections 14, 15, 16 and 17


Section 23

Act No. 55 of 1989 Financial Markets Control Act,1989

First item of Schedule


Section 33

Act No. 104 of 1993 Financial Institutions SecondAmendment Act, 1993

Section 55


Sections 1, 2 and 3

Board Notices

Board Notice 56 of 2015


Guidelines on the Conduct of Curators


1. Definitions2. Purpose of Guidelines3. General duties of curator4. Conflict of interest5. Investors6. Statutory requirements and record keeping7. Reporting to the registrar8. Reporting to Court9. Legal proceedings and forensic investigations conducted by curator10. Remuneration of curators11. Statements of accounts and invoices12. Settlement of legal proceedings13. Joint curatorship14. Transitional arrangements15. Short title and commencement

Guidelines on the Conduct of Curators


Financial Services Board

I, Dube Phineas Tshidi, the Registrar, under section 5(6) of the Financial Institutions(Protection of Funds) Act, 2001 (Act No. 28 of 2001) ("the Act"), hereby prescribe guidelines inaccordance with which a curator appointed under section 5 of that Act must act, as set out inthe Schedule.

Section 5(6) was amended through the Financial Services Laws General Amendment Act, 2013(Act No. 45 of 2013) to allow for the registrar to prescribe guidelines in accordance with whichcurators appointed under the section must act.

D P TSHIDIREGISTRAR6 March 2015

1. Definitions

In these Guidelines, "the Act" means Financial Institutions (Protection of Funds) Act, 2001 (ActNo. 28 of 2001) and any word or expression in these Guidelines has the same meaning as thatassigned thereto in the Act; and

"advocate"means an advocate of the High Court admitted in terms of the Admissions of Advocates Act,1964 (Act No. 74 of 1964);


"attorney"means any person admitted to practise as an attorney in the Republic in terms of theAttorneys Act, 1979 (Act No. 53 of 1979);

"auditor"means an auditor registered in terms of the Auditing Profession Act, 2005 (Act No. 26 of 2005);

"Auditor-General"means the Auditor-General contemplated in the Public Audit Act, 2004 (Act No. 25 of 2004);

"business interest"means holding any position or interest in a business as a director, officer, employee orotherwise, regardless of compensation;

"compensation relationship"includes the receipt or expectation to receive any remuneration or consideration, such as aconsulting fee, salary, rent or a gift;

"conflict of interest"includes a conflict in a business interest, financial interest or personal interest;

"curator"means a curator appointed in terms of section 5 of the Act;

"curator's firm"means a firm of attorneys or auditors or any other firm that conducts forensic investigations,in which a curator has a substantial direct or indirect business or financial interest, or withwhich the curator is financially associated;

"financial interest"means an investment beneficial interest in, or a compensation relationship with, aninstitution;

"forensic investigation"means an investigation into the business of an institution with the object of expressing anopinion or making a finding as to the compliance by the institution or those responsible for allor some of that business on behalf, or for the benefit, of the institution, with any law orgovernance, accounting, valuation or other applicable standard of best practice;

"independent firm"means a firm of attorneys or auditors or a firm that conducts forensic investigations, otherthan a curator's firm;

"institution"means an 'institution' as defined in the Act, the business of which has been placed undercuratorship in terms of the Act;

"investor"means the user of a 'financial service' as defined in the Financial Services Board Act, 1990 (Act


No. 97 of 1990);

"legal proceeding"means a notice of motion, rule nisi, summons and any document whereby legal proceedingsare commenced or advanced in a court of law;

"personal interest"includes a situation where a spouse, partner, dependent child or any other family member ofa curator may personally benefit from actions taken by the curator; and

"web site"means a web site as defined in section 1 of the Electronic Communications and TransactionsAct, 2002 (Act No. 25 of 2002).

2. Purpose of Guidelines

These Guidelines are intended to—(a) provide guidance to curators with regard to the exercise of their functions so as to

promote the proper fulfilment of the duties imposed and the exercise of powersconferred upon curators; and

(b facilitate the effective supervision of curators by the registrar in the best interest ofthe financial sector and investors.

3. General duties of curator

(1) Where a curator is appointed by a court in terms of section 5(1) of the Act, the powersand duties of the curator are set out in the Court Order in accordance with section 5(5).

(2) Where a curator is appointed by the registrar by agreement with the institution interms of section 5(10) of the Act, the powers and duties of the curator are set out inthe letter of appointment in accordance with section 5(11).

(3) A curator, when exercising the powers and carrying out the duties set out in the CourtOrder contemplated in section 5(5) or in the letter of appointment contemplated insection 5(11) of the Act, must —(a) at all times exercise the powers and carry out the duties honestly, fairly, with

due care, skill and diligence and in the best interest of the institution andinvestors;

(b) with regard to the funds of, or managed or under the control of, theinstitution, observe the utmost good faith and exercise proper care anddiligence; and

(c) exercise independent judgment and objectivity in decision-making.


4. Conflict of interest

(1) A curator may not have a conflict of interest—(a) between the curator's interest and those of the institution or investors;(b) in any transaction or agreement relating to the business of the institution or

the exercise of the functions of the curator.

(2) A curator must report any conflict of interest that the curator becomes aware of, to theregistrar without delay.

5. Investors

(1) A curator must maintain updated contact details of investors.

(2) A curator must keep the body of investors informed of the affairs of the curatorship byinforming them when reports as envisaged in paragraphs 7 and 8 of these Guidelinesare available on the web site of the curator or that of the registrar; provided that thecurator must timeously respond to individual enquiries from investors regarding theirspecific interests not dealt with in the reports.

(3) Information contained in a report to the registrar may for purposes of publication onthe web site, with the registrar's consent, be limited or omitted if publication of theinformation may prejudice legal or criminal proceedings against any person.

(4) The curator may, subject to subparagraph (5), publish on the curator's web site suchinformation as may be of interest to investors as was not specifically dealt with in thereports referred to in subparagraph (2).

(5) A curator must preserve, or aid in preserving, the confidentiality of informationobtained in the performance of the curator's functions, except—(a) to the extent that a court of law may order disclosure;(b) for the purposes of legal proceedings; or(c) insofar as disclosure may be necessary to perform the functions of a curator,

including the need to communicate relevant information to investors.

6. Statutory requirements and record keeping

(1) A curator must ensure that all accounting and other statutory requirements pertainingto the institution are complied with, including—(a) the keeping of proper accounting and financial records;(b) the preparation and auditing of financial statements;(c) the submission of prescribed reports and returns to the registrar and other

applicable authorities.

(2) A curator must keep records and minutes of all formal meetings held during the course


of the curatorship.

(3) A curator must ensure the safekeeping of all records and documents of the institutionor investors and may not destroy any record or document without the prior writtenapproval of the registrar.

(4) Despite the provisions of subparagraphs (1), (2) and (3), the curator may on good causeapply to the registrar to be exempted or partially exempted from compliance with thisparagraph; provided that in the case of subparagraph (1), the registrar is empoweredby the applicable legislation to grant such exemption.

7. Reporting to the registrar

(1) A curator must regularly report, and in writing, to the registrar, including upon theregistrar's request, on all curatorship activities, in particular—(a) the initiation, defence or settlement of legal proceedings, indicating in

respect of each matter—(i) who the attorneys of record for the parties are or were;(ii) the fees incurred in respect of the curator's attorneys of record;(iii) the legal disbursements incurred in respect of counsel and other

service providers;(iv) whether or not litigation has been concluded;(v) in the case of concluded litigation, the outcome of the litigation;(vi) the amount recovered on taxation of legal costs;

(b) the conclusion of a significant agreement, including an agreement relating tothe disposal of assets done in accordance with the terms of the Court Order orthe letter of appointment;

(c) the continued adherence, or otherwise, by the institution to any statutoryrequirements;

(d) any significant obstacles encountered in performing the curator's functions;(e) factors causing delays in progressing the curatorship;(f) any irregularity uncovered that may require regulatory action or the referral of

a matter for criminal prosecution;(g) an overview of assets disposed of or alienated and how the proceeds will be

distributed;(h) any matter which may require relief or sanction from the court;(i) the costs of the curatorship in accordance with paragraph 10 of these

Guidelines; and(j) any recommendation as to how the continuation of the curatorship should be

dealt with further.

(2) A curator must provide the report contemplated in subparagraph (1) at intervals and inthe manner determined by the registrar if not determined by the order of court(where applicable).


8. Reporting to Court

(1) In the case of a curatorship ordered by Court, the curator must report to the Court inaccordance with the terms of the initial and any subsequent Court Order.

(2) A copy of the report must be served on the registrar who must set the matter down forconsideration of the report on the date provided for in the Court Order or if no datehas been provided, as soon as possible.

(3) The curator's report only becomes public on the matter being called in Court.

9. Legal proceedings and forensic ...

(1) Legal proceedings to be instituted or defended by a curator or any forensicinvestigation to be conducted with respect to the institution must be entrusted to anindependent firm appointed by the curator, subject to the approval of the registrar.

(2) Despite subparagraph (1), a curator may apply to the registrar for authorisation toutilise the curator's firm for the purpose of instituting or defending legal proceedings,or for conducting a forensic or other investigation in relation to the institution or itsbusiness.

(3) An application by the curator under subparagraph (2) must set out all material aspectsjustifying the use of the curator's firm instead of an independent firm.

(4) The registrar may—(a) in exceptional circumstances but subject to subparagraph (5), grant the

application contemplated in subparagraph (2) with regard to all legalproceedings or forensic investigations during the curatorship, or relating tospecific legal proceedings or an investigation only;

(b) impose any condition to which the approval is subject.

(5) Despite any provision of these Guidelines, the following legal proceedings orinvestigations may not be undertaken by the curator's firm:(a) those instituted against the curator in which the conduct or integrity of the

curator is, or may be, an issue;(b) an application to set aside or alter any decision made, or any action taken, by

the curator with regard to any matter arising from, or in connection with, thecontrol and management of the business of the institution;

(c) an application to cancel the appointment of a curator as envisaged in section5(9) of the Act; or

(d) any other legal proceedings or forensic investigation as may from time to timedetermined by the registrar and communicated to the curator in writing.


10. Remuneration of curators

(1) The basis for a curator's remuneration shall be determined—(a) by the Court Order contemplated in section 5(5) of the Act; or(b) by the appointment letter contemplated in section 5(11) of the Act.

(2) Where the curator is—(a) an auditor, the remuneration shall be based on the Auditor-General's tariff for

outsourced arrangements;(b) an advocate or attorney, the fee should be reasonable and in accordance with

the norms of the legal profession as agreed between the registrar and thecurator; or

(c) any other person, the fee must be reasonable and fixed by agreementbetween such person and the registrar,

provided that in the case of subparagraphs (a) and (b) the remuneration may belimited to a fixed amount or other reasonable amount as agreed between the curatorand the registrar.

(3)(a) Where the institution does not have or control sufficient financial resources to

cover the curator's remuneration, a curator may propose to the registrar adifferent basis for remuneration, including an arrangement whereby thecurator will be entitled to a percentage of assets added to the estate of theinstitution or to the curatorship from time to time, but where the curator willnot charge fees or disbursements in relation to the curatorship if no assets areso added.

(b) Any such arrangement proposed by a curator must be—(i) sanctioned in terms of an order of court as contemplated in section

5(5)(c) of the Act; or(ii) in the case of a curatorship under section 5(10) agreed to by the

institution;and may, in both instances, be made subject to a limitation.

11. Statements of accounts and ...

(1) A curator must—(a) on a continual basis maintain statements of account for fees in respect of

services rendered and disbursements incurred for and related to thecuratorship;

(b) periodically submit the statements of account in the format determined by theregistrar for approval by the registrar prior to recovery of the fees or expensesfrom the institution or assets of investors, as the case may be.

(2) A statement of account must be accompanied by a full narrative of the servicesrendered supported by proof of disbursements and payments to other serviceproviders as well as the time spent on the execution of the curator's functions.


(3) Payment to the curator may not be made directly from funds realised by theliquidation of assets, such funds must first be paid into the bank account held in thename of the curatorship.

(4) Payment to other service providers may not be made unless pursuant to an invoiceapproved by the curator and, in case of a joint curatorship, approved by all thecurators.

(5) Advance payments must be dealt with as such in the accounting records and not aspartial payments on invoices; provided that all advance payments must be approvedby the registrar.

12. Settlement of legal proceedings

The curator may not take any decision regarding the settlement of legal proceedings exceptwith the approval of the registrar, which approval must be in writing either upon the grantingthereof or in confirmation of any earlier verbal approval.

13. Joint curatorship

(1) Where more than one curator has been appointed—(a) the curators may decide on a work division between them and in such case

must inform the registrar of the work division;(b) the curators must hold regular and at least quarterly meetings which must be

properly minuted, in which all material aspects of the curatorship arediscussed;

(c) all formal reports, statements of account or other formal communication withthe registrar must be signed by all the curators, except where a curator istemporarily unavailable and this requirement will unduly delay the progressof the curatorship.

(2) Despite subparagraph (1)(a), curators are jointly responsible for the curatorship.

14. Transitional arrangements

Any legal proceedings instituted or defended or forensic investigations commenced, prior tothe commencement of these Guidelines, and for which the curator's firm is utilised, may beconcluded by the curator's firm.


15. Short title and commencement

These Guidelines are called the Guidelines on the Conduct of Curators and come intooperation on publication.

Index39Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001)

Keyword Index

- A -accounts 35

administrative sanction 24

admissible in evidence 26

Appeal against determination 24

Appointment of 15

- B -Board Notice 56 of 2015 28

Board Notices 28

books of account 26

- C -certain practices as 25

Chapter 1 10, 11

Chapter 1A 12

Chapter 2 14

commencement 37

committee proceedings 20

Conduct of Curators 29

conducted by curator 34

Conflict of interest 32

curator 15, 31, 34

- D -dealing with funds of 10

Declaration of interest 11

Definitions 6, 29

Determination 22

Disclosure of determination 24

Duties of persons 10

- E -Enforcement 14

enforcement committee 20, 21, 22

Enforcement committee proceedings 20

enforcement of determination 23

entries in 26

- F -financial institutions 10

forensic investigations 34

Funds and Trust Property 10, 11

- G -General duties 31

Guidelines on 29

- H -Hearing 21

held by Financial Institutions 10, 11

- I -Investment of 11

Investors 32

invoices 35

irregular or undesirable 25

- J -Joint curatorship 36

- L -Laws Repealed 28

legal proceedings 34, 36

- N -Notification 23

- O -Offences 27

On-site visits 12

- P -powers of 18, 26

Purpose of Guidelines 31

- R -record keeping 32

Records 26

Referral 20

registrar 18, 26

Repeal of laws 27

Reporting to 33

Reporting to Court 34

Restriction on 26

- S -Saving of rights 24

Settlement of 36

Short title 28, 37

Statements of 35

Status of footnote 27

Statutory management 16

Statutory requirements 32

- T -the registrar 33

Transitional arrangements 36

Transitional provision 27

trust property 11

trust property controlled by 10

- U -Util isation 24

- V -Verification of information 26

financial institutions (protection of funds) act, … · financial institutions (protection of...

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