Second Reading Debate: Financial Markets Bill by Ms Judith Tshabalala, ANC MP (NA)
1 November 2012
Honourable Minister Gordhan
Honourable Deputy Minister Nene
Honourable Members of Parliament
The ANC has done more than most political parties when it comes to combating unethical behaviour through ideological debates and direction, regulations, legislation and public watchdog bodies. The domestic capital markets play a fundamental role in allocating domestic and foreign savings towards South African investment requirements. One of the key objectives of the Bill is to ensure that there are measures in place to mitigate any future financial crisis that may arise.The Bill seeks to rationalize South Africa`s securities regulatory framework and to bring it into line with international best practices as set out by the International Organisation of Securities Commission. It also pursues to provide an enabling framework for regulations that should give effect to South Africa`s G20 commitments on financial sector regulatory reform following the global financial crisis.
As a result of the 2008 international financial crisis, South Africa`s economy lost nearly one million jobs and, although South Africa had sound macro-economic fundamentals and a robust financial regulatory framework before the crisis.
The ANC approach to the question of the role of business is informed, first and foremost, by the character of the transformation project we are undertaking. Indeed, in the context of its call for the people to share in the country`s wealth, and for the land to be shared among those who work it, the Freedom Charter also asserts: "All people shall have equal right to trade where they choose, to manufacture and to enter all trades, crafts and professions." This, it can be argued, applies as much to all of society as it would to members and leaders of the ANC. The issue therefore is not whether members and leaders of the ANC have this right or not, the question is how it is exercised, and with what implications for the movement and for society as a whole.
The Financial Markets Bill is intended to align South African legislation and regulatory framework with developments and standards in other jurisdictions to enable integration and to open the market to local and foreign markets players. The South African President Jacob Gedleyihlekisa Zuma has committed this country to a global regulatory reform program, which includes a stronger regulatory framework, more effective supervision, improved crisis resolution and enhanced accountability through international assessments and peer reviews. These commitments are translated into four policy priorities, being financial stability, consumer protection and sound market conduct, expanding access through financial inclusion and combating financial crime, such as money laundering etc. The cooperation between several local and foreign regulators should strengthen the ability to detect and act on regulatory contraventions and systemic risk aspects.
There is a need for all-inclusive approach to regulation of the financial sector in South Africa. Given the global nature of financial markets, it is imperative that the Bill strikes the appropriate balance between facilitating efficient cross-border financial transactions while allowing domestic regulators sufficient powers of oversight and supervision to manage risks within the domestic market. In finding this balance, it is important to recognise the relative size of the South African financial markets in comparison with other markets, as well as the need for global harmonisation of regulation in line with the commitments made by the G20.
The regulation of derivatives is complex and many countries are currently debating an appropriate regulatory framework. The African National Congress government adopted an approach of developing a detailed regulatory framework for derivatives in South Africa in a consultative manner. The ANC welcome the role given to the Minister of Finance and the Governor of Reserve Bank in respect to regulating in this area.
There are currently a number of licensing authorities such as FAIS, FICA, Insurance Ombudsman, Banking Ombudsman, licensing of compliance officers, various license under the Banks Act. The Bill aligned with the already existing licensing procedures. Chairperson the regulation of Financial Markets in South Africa does not have to be isolated from the rest of the financial services sector. The Banks Act and the Financial Markets Bill should closely align so that SA does not face problems of systemic risk. It is the ANC government that speaks of the local regulatory framework that should be aligned with international standards, while appreciation should be taken of the essential to adapt international standards to local conditions. While aligning financial market legislation with the wider legislative framework consideration of national priorities and differences should be taken into account to ensure that international standards are implemented within a robust framework, but with appropriate flexibility so as not to unfairly prejudice South Africa`s well regulated banking system or stifles economic development.
Securities regulation should protect investors from misleading, manipulative or fraudulent practices, including insider trading and the misuse of client assets. It should compel an intermediary to get the necessary authorisation from the FSB before it starts rendering services. These intermediaries should comply with standards set by the regulators with regards to governance, transparency and disclosure requirements as supported by comprehensive supervisory systems of inspection, surveillance and compliance programmes.
The view is supported that, relative to other consumer oriented sectors, the financial services sector should be held to higher standards with regard to market conduct and consumer protection. Effective market conduct regulation in financial services, therefore, requires a nuanced response to risks that arise for investors - broad consumer protection mechanisms afforded through other legislative instruments like the Consumer Protection Act No. 68 of 2008 may not sufficiently deal with the complicated structures of the financial services sector and capital markets in particular. This means that financial services regulation must necessarily fill these gaps.