Board Notice 92 of 2014 requires that a manager must obtain a signed application form or a contract from an investor. However, it is silent on the format or form that such a signature must adopt when contracting through electronic means.
Section 13(1) of the Electronic Communications and Transactions Act, 2002 (Act No. 52 of 2002) (ECTA) provides that where the signature of a person is required by law and such law does not specify the type of signature, the requirement in relation to a data message is met only if an advanced electronic signature (AES) is used.
Therefore, as things currently stand, when a CIS manager provides an investor with the opportunity to complete and submit an application form or contract electronically on an online platform, that investor must sign the application form or contract by using an advanced electronic signature (“AES”), as defined in the ECTA.
Due to the technicalities relating to AES as set out in the ECTA, it may often be difficult for CIS Managers to comply with the AES requirements in the abovementioned circumstances. Even though the Main Deeds of CIS managers have provisions that govern electronic transactions between the CIS manager and the investor, the terms of the Main Deed will not override the requirements set out in the ECTA.
Electronic transacting supports easier access for customers and is, as a result, supportive of financial inclusion. Accordingly, the FSCA is of the view that it would be in the public interest not to require CIS managers to apply an AES when transacting electronically. As such, the FSCA is proposing to exempt CIS Managers from this requirement.
It should be noted that the CIS managers are not exempted from having to obtain the investor’s signature completely, but only to the extent than an AES must be obtained.
Conditions have been imposed in the exemption to ensure that both the CIS managers and the investors are afforded the necessary protection and that the exemption will not prejudice the achievement of the objects of CISCA.
Pam Saxby of LegalBrief today notes an additional condition is that “…it is proposed that, in such circumstances, the manager concerned would be required not only to verify the identity of the investor but also to ‘implement processes to authenticate’ each of their transactions.”
Please click here to download FSCA Communication 11 of 2021.
