PRESENTATION BY FINANCIAL SERVICES BOARD TO THE NCOP SELECT COMMITTEE ON FINANCE THE SECURITIES SERVICES BILL, 2004
TOPICS TO BE ADDRESSED Background Ambit Application Structure Conclusion
BACKGROUND Policy Board reviewed regulatory framework in 1998 Legislation outdated Legislation does not comply with best international practice FSB established drafting team in 1998
AMBIT Will consolidate the - –Stock Exchanges Control Act, 1985: JSE –Financial Markets Control Act, 1989: BESA & JSE –Custody and Administration of Securities Act, 1992: STRATE Ltd –Insider Trading Act, 1998 Will repeal these Acts Also adds new provisions to those Acts
APPLICATION Exchange and authorised users (members) CSD and participants Clearing house Person trading unlisted securities Issuers of securities Clients of authorised users and participants Market abuse - insider trading and market manipulation
STRUCTURE The Bill confers the status of a SRO on exchanges and CSD’s The Bill is structured in 9 chapters Emphasis is placed on significant legislative changes and new principles
CHAPTER 1: PRELIMINARY PROVISIONS Objects and application of Bill and prohibited activities Concepts common to the whole Bill are defined
CHAPTER 2: REGULATION & SUPERVISION OF SECURITIES SERVICES - Functions of the Registrar/Deputy Registrar of Securities Services - Financial Markets Advisory Board
CHAPTER 3: EXCHANGES Licensing Functions of an exchange Rules of the exchange Off-market transactions in listed securities and the reporting thereof Trading of unlisted securities
CHAPTER 4: CUSTODY & ADMINISTRATION OF SECURITIES - Licensing of a CSD - Acceptance of participants - Approval of nominees
CHAPTER 5 : GENERAL PROVISIONS APPLICABLE TO SROs SRO is defined as an exchange or a CSD Renewal of licences Demutualisation of SROs Limitation on control of SROs
CHAPTER 6: CLEARING HOUSE Clearing houses need to be licensed (annually renewed) if this function is not performed in-house by an exchange Amalgamation or transfer of clearing house – two or more clearing houses may amalgamate or merge with one another or with any SRO
CHAPTER 7: CODE OF CONDUCT The Bill requires the Registrar to prescribe a code of conduct The Bill prescribes the basic principles for the Code The Code is binding on authorised users, their officers, employees and clients
CHAPTER 8: MARKET ABUSE Insider trading and other market abuse practices
MARKET ABUSE As in the case of insider trading, these abuses will henceforth fall under the supervision of the Directorate of Market Abuse, formerly known as the Insider Trading Directorate. The penalties for these prohibited practices as well as for insider trading have been substantially increased, i.e. a fine not exceeding R50m or imprisonment for a period not exceeding 10 years, or both a fine and imprisonment.
CHAPTER 9: GENERAL PROVISIONS Auditing Powers of the Registrar and court
CHAPTER 9: ESTABLISHMENT OF ENFORCEMENT COMMITTEE Establishment, composition, functions, proceedings, etc. of an independent EC With the power to impose an administrative penalty on, or to require the payment of compensation (only iro insider trading) by a person who contravenes, or fails to comply with the Bill It is expected that the EC will give the FSB more effective and expeditious enforcement powers
CHAPTER 9: GENERAL PROVISIONS Winding-up, judicial management and curatorship Right of appeal Offences and penalties Regulations
SCHEDULE - AMENDMENTS TO THE FSB ACT, COMPANIES ACT AND INSOLVENCY ACT The amendments to these Acts are of a consequential nature
CONCLUSION SSB will bring SA’s securities legislation on a par with best international practice SSB takes cognisance of important developments within the local and foreign securities markets industry SSB will further promote confidence and the maintenance of a stable SA securities market environment
The SSB strives to maintain a healthy balance between investor protection and the enhancement of international competitiveness of securities services in the Republic CONCLUSION
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