• A “market infrastructure” is defined in the Financial Markets Act, No. 19 of 2012 (the “Act”) to include key players such as licensed exchanges, clearing houses and central securities depositories.  
  • Section 62 of the Act requires that a market infrastructure take the necessary steps to avoid, eliminate and otherwise manage conflicts of interest between its regulatory functions and its commercial services. These steps must include: “the implementation of appropriate arrangements, which arrangements must comply with the requirements prescribed by the registrar…”  
  • On 1 January 2015, the Financial Services Board published Board Notice 1 of 2015, in terms of which the Registrar of Security Services prescribed the requirements contemplated in section 62. In terms of these requirements, a market infrastructure must:
    • establish an internal process to identify conflicts of interest;
    • record, adopt and implement policies and measures to address conflicts of interest;
    • appoint an independent committee to ensure that the market infrastructure complies with the above requirements; and
    • set out sanctions that may be taken by the market infrastructure in the event of a breach of its policies;  
  • A market infrastructure will also be required to:
    • annually assess the efficacy of the measures adopted;
    • annually prepare a Conflicts of Interest Assessment Report, which  report must comprehensively deal with the assessment of all material and relevant matters related to the market infrastructure’s management of conflicts of interest;
    • submit the report along with its Annual Supervisory Assessment Report to the registrar;
    • publish its Annual Conflicts of Interest Assessment Report; and
    • disclose the details of the nature and extent of any conflicts in its annual report contemplated in section 69 of the Financial Markets Act.   
  • A market infrastructure must comply with the notice with effect from 31 December 2015.