‘The Report of the Committee of Investigation into the Promotion of Equal Competition for Funds in Financial Markets in South Africa” was published in September 1992 and is better known as the Jacobs Committee Report.It laid the basis for the next 30 years of financial sector reform in South Africa, proposing much of the legislative and regulatory scaffolding on which our savings industry now rests.
The committee makes very little mention of direct portfolio investment by individual investors, trusts, charities, companies and other non-institutional entities, or that these investors might be crowded out by the large institutions. Perhaps this was their blind spot? Contrast this with a personal share portfolio: if the investor trades frequently, gains are taxed as income at the investor’s top marginal tax rate; if the investor trades infrequently, gains are taxed as capital gains in the tax period in which the gains are actually incurred.
It is also an outrage that investors in tax-free savings accounts are forced to pay fees to institutional CIS managers as the only available way to use a tax-free savings account to invest in shares. Another incentive meant for individual savers that has somehow been diverted to serve the interests of large institutions.