SAIFM’s inaugural Regulatory Summit held on 10 September 2014 was received with overwhelming acclaim. It provided much needed insight into new and proposed regulatory measures spanning the entire financial services area from the new Financial Sector Bill to the proposed hedge fund regulations. Compliance risk has been identified as the main risk that companies in the financial sector now face. Knowledge about the practical implementation of recently promulgated legislation and the thinking behind new proposals and the likely direction in which they will develop, play an important role to assist in managing this risk.
The key note address was delivered by Nicky Newton-King, the chief executive of the JSE highlighting the role of regulation to remedy weaknesses exposed during the financial crisis. The regulatory measures in place in 2009 were found wanting to protect the world economy from financial meltdown and inadequate regulation was identified as one of the key causes for the crisis. She discussed the South African regulatory response which must align to new global standards and emphasised the importance of striving for balance between benefits and costs. She concluded that while new age regulation will not prevent another crisis, it is necessary, as we understand some risks far better in the post-crisis world. To read the full key note address, please click here.
The Twin Peaks regulatory reform and the role of the new market conduct authority to be established were next discussed by Katherine Gibson of the National Treasury. While the SARB will receive a comprehensive mandate in respect of financial stability, the new market conduct authority will have to accept responsibility for an outcomes-focused approach to prevent conduct crises such as Abil. The sectoral conduct laws will be overhauled to ensure regulatory cohesion. To access the full presentation, please click here.
Roy Havemann of the National Treasury was our next speaker to explore the legislative reform for OTC derivatives including challenges such as domestic harmonisation, international harmonisation and equivalence and the lack of a local financial market infrastructure and extra-territoriality. He described the regulations and board notices that will be issued under the Financial Markets Act that include aspects such as a definition and categorisation of OTC derivatives, a definition and categorisation of OTC derivatives providers, requirements for authorisation, code of conduct and reporting and clearing obligations of OTC derivative providers. To access the full presentation, please click here.
The proposed hedge fund regulations were discussed next by Olano Makhubela of the National Treasury, providing the context for the development of this initiative. The aim of the regulations includes the development of the financial markets to cater for different investor risk appetites, enhance investor protection and confidence, systemic risk monitoring and management, enhance integrity of the industry and enhance reporting, disclosure and transparency of the regulator and investors. To access the full presentation, please click here.
The CPSS/IOSCO principles for financial market infrastructures were explored by Beverley Furman of Strate setting out regulatory best practices and the clearing and settlement. She discussed the core principles for systemically important payment systems and recommendations for securities settlement systems and central counterparties as well as the lessons that were learnt from the financial crisis and experience gained in applying standards. Safety and efficiency in payment, clearing, settlement and recording arrangements must be enhanced while systemic risk must be limited. To access the full presentation, please click here.
Leanne Jackson of the Financial Services Board next discussed how the Treating Customers Fairly regulatory regime will impact on financial market practitioners. The TCF regime includes the provision of financial services to any customer or end user whether individual or corporate and will include providers under the Financial Market Act and the operation of a market infrastructure. Fair treatment is not defined but will be tested against demonstrable delivery of the six TCG outcomes. To access the full presentation, please click here.
The regulatory measures considered to improve the investment outcomes for retirement fund members were next discussed by Rosemary Hunter of the Financial Services Board. Some of these measures include improving demand by increasing bargaining power, more specifically, promoting transparency, harmonisation, competition, consolidation and better qualified retirement fund board members. On the supply side, measures to improve standards of supply include improving standards of investment products and conduct by providers of investment-related services to retirement funds. To access the full presentation, please click here.
The role of capital markets in supplying long-term capital for economic development is explored next by Christo Lus of Third Circle Asset Management. Preconditions for growth, savings and investment in a macro context, reasons for regulatory and markets failures, trends likely to constrain the future supply of long-term finance as well as international actions to address barriers to long-term financing are discussed. To access the full presentation, please click here.
A panel chaired by Ingrid Goodspeed of National Treasury next discussed conflicts of interest in the context of financial market professionals. The panellists included Caroline da Silva and Rosemary Hunter of the FSB, while Sankie Morata of the FPI provided an industry perspective.
The summit closed with a presentation by Ingrid Goodspeed to discuss what the changes to the regulatory environment could mean for risk and compliance. She highlights the complexity and scope of the new regulatory frameworks that lead to exponential growth in resources required for implementation and enforcement on a global basis. To access the full presentation, please click here.