South Africa Consults On Financial Regulatory Reform

by Lorys Charalambous, LawAndTax-News.com, Cyprus

11 August 2011

South Africa’s National Treasury has, for public consultation, issued the draft Financial Markets Bill 2011 (FMB), which gives effect to a review of, and replaces, the existing Securities Services Act (SSA), in regulating the country’s securities market.

The SSA has governed the regulation of financial markets in South Africa since 2005, primarily focusing on the regulation of securities exchanges, central securities depositories, clearing houses and their respective members. The SSA aligned the regulation and supervision of South African financial markets with the then-prevailing international developments and regulatory standards.

However, in recognition of the need for financial regulatory reform after the recent global crisis, the government committed to a stronger regulatory framework, more effective supervision, improved crisis resolution and enhanced accountability.

The FMB will, therefore, amongst other matters, strengthen the ‘Self Regulatory Organization’ model of supervision (which is believed to have proved to be efficient and effective in the past); align financial markets regulation with best international practice; implement South Africa’s commitment to improve investor protection in cross-border transactions; and ensure alignment between legislation that governs financial markets and the wider legislative framework, including the new Companies Act.

Due to the magnitude and complexity of the amendments to the SSA, it was deemed appropriate, in the interest of simplicity and legal certainty, to replace it with the FMB, rather than propose a complex amendment bill.

Comments on the FMB are invited from all interested stakeholders by September 5, 2011. After consideration of the submissions, it will be tabled in parliament and implementation is expected to take place in 2012.

At the same time, the government also approved the release of the draft Credit Ratings Services Bill (CRSB) for public comment. Introducing a regulatory framework for credit ratings agencies (CRAs) is one of South Africa’s G-20 commitments, and the CRSB seeks to align the South African regulation of CRAs with international best standards and practice.

The CRSB aims to ensure that South African authorities can work with their international counterparts to ensure responsible and accountable CRAs at a global level; to protect the independence, integrity, transparency and reliability of the credit rating process and credit ratings; to improve investor protection; and to reduce systemic risk.

Written comments on the CRSB should be sent to the National Treasury on or before September 5, 2011.

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