It scares me that so many people are willing to talk about Regulation 28, SARB and ETFs with limited knowledge. Sygnia obtained a legal opinion from one of the top 4 legal firms before making any statements.
1. SARB re-classified inward listed ETFs referencing foreign assets (eg Sygnia Itrix S&P500 Index ETF) as domestic assets for institutional investors, trusts, partnerships and others. This means they no longer fall under 30% or any other prudential limit on foreign investments.
2. Regulation 28(4)(d) explicitly prohibits using the look through principle to circumvent SARB rulings. So you can’t look through a domestic asset as classified by SARB and turn it into a foreign one again.
3. FSCA cannot override SARB and re-classify a domestic asset back to being a foreign one. It can however amend Regulation 28 and restrict investments in such ETFs to some set %. That is a substantive change.
4. If it does so for inward listed ETFs, it must look at all other inward listed instruments at the same time. In fact all the instruments that SARB has just reclassified as domestic assets. Why single out low cost index trackers which are good for investors and for the economy?
5. In fact, in presenting any such change and effectively overruling SARB, the FSCA would have to argue that their action is in the best interest of institutional investors.
Until such time as FSCA overrules SARB’s strategy as articulated in MTBPS (if they do), SARB Circular stands and can be relied upon. It is up to each investor to decide what they wish to do. Sygnia in no way provides advice. But we will always try to provide correct information.
Sygnia is running webinars unpacking this if you want to learn more.

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