CODE OF CONDUCT FOR PARTIES UTILISING SECURITIES FINANCING TRANSACTIONS

Financial Services Board

Dear Michael

Re: Code of Conduct for parties utilising Securities Financing Transactions (“SFT”) in the South African Securities Markets 

 

We thank you for the opportunity to provide comments on the draft Code of Conduct (“the Code”) that sets principles for parties involved in securities financing transactions (SFTs).

We highly recommend that further industry engagement is required as we are concerned on a number of the aspects that the Code is trying to achieve.  It also repeats what is contained in the GMSLA, legislation (FICA, money laundering, etc.) and current market conduct regulations.

The draft states that it is prescribed under Section 74(1) (ii) of the Financial Markets Act (“FMA”).  Section 74(1) (ii), entitles the Registrar to prescribe a Code of Conduct in respect of “any other regulated person”.  If one has reference to the definition of “regulated person” and excludes those mentioned in Section 74(1)(i), the only persons that can be regulated in terms of Section 74(1)(ii) are central securities depositories, Clearing Houses, Exchanges, Trade Repositories, Nominees and “any other person” specified in regulations for this purpose. 

As far as we have been able to ascertain, no other party has been specified by regulation for purposes of this definition.  There has been a draft regulation (see Government Gazette 38845 of 5 June, Notice R457) which indicates that regulations are to be published and that “OTC Derivative providers” will be “regulated persons”. 

We have not been able to trace an actual regulation in this regard.  Be that as it may, the activities sought to be regulated in terms of this Code of Conduct are not derivatives.  As we see it, we are not sure the Registrar can regulate the parties to securities financing transactions in terms of the Code of Conduct published under Section 74(1) (ii).  

The Code does not adequately distinguish between the different types of securities financing transactions and, in doing so, confuses in certain cases the fact that the legal relationship is different (a secured loan vs a sale).  Also, in many instances the defined terms are not used where they could be.  As a suggestion, where defined terms are used in the body of the code they should be indicated with initially capitals, for ease of reference. 

Notwithstanding the aforegoing, we have set out below, joint feedback from BASA & SASLA members under Appendix 1.

We look forward to engaging with you further on this matter.

Yours sincerely
 

G Haylett                                                                                J Taylor

GM Prudential Division                                                          Chairperson SASLA

Read the full Letter to FSB re CoC for parties utilising SFT in the South African securities market

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