18 December 2017
Reporter: Jenna Lomax

South Africa extends code of conduct consultation deadline

The South African Registrar of Securities Services has extended the deadline for its new code of conduct for the country’s securities lending market.

The deadline for industry comment was initially set for 20 November 2017, but has been pushed back until 31 December 2017 to give regulators more time to review requirements in the face of early criticism from industry stakeholders.

According to the Registrar, the extension will allow parties who deal with securities financing transactions to review the new requirements under a more generous timeframe.

The code covers securities lending and securities borrowing, repo and margin trade transactions.

Among the main principles to adhere to are that “prudent practices and standards of market conduct” are followed at all times and there is always to be a “disclosure of whether parties to an securities financing transactions (SFTs) are acting as principal or agent”.

All parties should make sure that “all SFTs must be arranged through or concluded with authorised financial institutions” and there should be “open and cooperative engagement between parties in the SFT market and the Financial Sector Conduct Authority”.

In addition, “parties to a SFT must not enter into such a transaction with the intention of creating a false or distorted market or disrupting an orderly and a fair market in the underlying securities.”

Any person or financial institution considered a “party” is required to follow the Code of Conduct which will come in to operation on the date of publication.

At the beginning of December, the South African Securities Lending Association (SASLA) raised concerns over the applicability of the code.

“[The proposed code] did not adequately distinguish between different types of securities financing transactions”, according to SASLA’s chair Juanita Taylor and Gary Haylett, general manager of strategic projects at the Banking Association South Africa.

“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.”

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