On 12 September 2014, the Registrar of Securities Services (Registrar) published for comment Board Notice 113 of 2014 (Notice) setting out draft requirements with which market infrastructures must comply to manage possible conflicts of interest and the manner in which a market infrastructure has to conduct an annual assessment in compliance with section 62 of the Financial Markets Act 19 of 2012 (FMA).
The Notice, if brought into effect, will make it a requirement for a market infrastructure to establish an appropriate and effective internal governance process to deal with any potential, perceived or actual conflicts of interest between regulatory functions and commercial services. This internal governance process must be capable of identifying and addressing potential, perceived or actual conflicts of interest, and in order to do so, must have effective and appropriate recording and implementation policies and measures, to the satisfaction of the Registrar.
Additionally, the Notice requires the market infrastructure to:
- conduct an annual assessment of the efficacy of the policies, processes and measures adopted by the market infrastructure to identify, avoid, eliminate, or otherwise manage and disclose potential, perceived or actual conflicts of interest between its regulatory functions and its commercial functions;
- prepare an Annual Conflicts of Interest Assessment Report (Report) and submit it to the Registrar together with its Annual Supervisory Assessment Report. The results of the Report must then be published; and
- disclose details of the nature and extent of any conflicts in its annual report contemplated in section 69 of the FMA and record and publish all arrangements regarding the manner in which the market infrastructure deals with conflicts of interest.
The draft requirements are open for public comment (to be submitted to the Capital Markets Department of the Financial Services Board) until 13 October 2014.