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Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002)

Codes of Conduct

Notice on Codes of Conduct for Administrative and Discretionary FSP's, 2003

Chapter II : Code of Conduct for Discretionary FSP’s, 2003

Part III : Duties of hedge fund FSPs, transitional provision and short title

8A. Duties of hedge fund FSPs


8A.1 The relevant requirements for discretionary FSPs apply to hedge fund FSPs and their clients as if they were originally enacted for that purpose, but subject to—
(a) the necessary changes;
(b) the provisions of this section, and provisions of the Act or any other law, which may render a particular provision applying to discretionary FSPs clearly inapplicable to a hedge fund FSP and its clients, in general or in a particular case.


8A.2 A hedge fund FSP must before rendering any intermediary services to a client who has clearly indicated to the FSP that the client requires intermediary services in connection with a financial product governed by the Act to be rendered specifically by a hedge fund FSP, provide a written disclosure to the client—
(a) of the applicability in terms of subsection 8A.1 to the relationship between the client and the FSP of the requirements for discretionary FSPs referred to in that subsection; and
(b) in the format from time to time determined by the registrar, on risks involved in hedge funds, and obtain from the client a written confirmation of receipt of such written disclosures.


8A.3 A hedge fund FSP must, after having complied with subsection 8A.2, with the introductory provisions of subsection 5.1 and with subsection 5.2, and before rendering any intermediary services to the client, obtain an additional signed mandate from the client, in accordance with the proviso to the introductory provisions of subsection 5.1 and subsection 5.2, which apply with the necessary changes.


8A.4 The mandate from a client must confirm the existence and contents of the first mandate, if applicable as contemplated by virtue of subsections 8A.1 and 8A.3, and in particular the utilisation of a hedge fund portfolio for purposes of executing the intermediary services required by the client, and must contain express confirmation by the client that the client—
(a) approves of—
(i) the clients investment objectives, guidelines and trading philosophy of the hedge fund FSP, as disclosed and stated in the mandate;
(ii) utilisation by the hedge fund FSP of the process to be implemented in the form of strategies or positions (including leverage and/or net short positions, borrowing limits and risk management principles to be applied to mitigate interest rate, liquidity, and credit and derivative risk), risk profile and risk management (for instance a sensitivity analysis), as disclosed and stated in the mandate; and
(b) takes note of the FSP's affirmation, as stated in the mandate, that the establishment of the relevant portfolio does not conflict with any law, and that the operation and management thereof continuously comply with any law that may be applicable thereto.


[Section 8A inserted by section 2(d) of Board Notice 89 of 2007]