REGULATION AND ENFORCEMENT


The basic principle and idea in investor protection  is that  all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the FSB and the JSE requires public companies to disclose meaningful financial and other information to the public. This provides a common pool decisions of whether to buy, sell, or hold a particular security.

It is there through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.

There are currently agencies that have been mandated to ensure that there is compliance with the current Regulation and legislation in the Securities industry and that, the investing public is protected from any fraudulent activities that occur daily on the Market. These include

  • The Financial Services Board. (FSB).
  • Securities Regulation Panel.
  • The office of the Register of companies.
  • The Johannesburg Stock Exchange (JSE) as an SRO.
  • The National Prosecuting Authority.
  • The Department of Justice (The DOJ)

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The Financial Services Board is adequately empowered by legislation  ( The Securities Services Act, 2004  to  licence and supervise exchanges namely the JSE Limited , the Central Securities Depositories ( Strate Limited) and clearing houses to ensure sound and efficient markets and other related services for the exchange of relevant securities together with mechanisms for investor protection. Exchanges and and central depositories are self regulatory organizations ( SRO’s) responsible for ensuring that their users and participants , respectively comply with the provisions of SSA  and their rules as approved by the FSB. The FSB is also responsible for the renewals of the the SRO’S  annually. The SSA applies to regulated persons namely SRO and any other persons who provides securities services, ie. the buying and selling of securities , the custody and administration of securities , the management of securities by an authorized  user and the clearing and settlement of transactions in listed securities. In cases where  a dispute arises between client and an authorized user and it can not be resolved by  authorized  user , it m should be raised with the SRO concerned , before complaint is lodged with the FSB.

Market abuse

The  Directorate of Market  abuse is a committee of the Financial Services Board (FSB), it is responsible for combating market abuse in the South African financial  markets , Market  abuse include Insider Trading , prohibited trading practices ,(market manipulation) , none compliance with disclosure requirements  false and misleading statements   fraudulent activities in the buying and selling of securities in listed companies .

These contraventions are investigated  by a forensic team at the DMA  who may refer such  contraventions to the Enforcement committee of the FSB, If the Enforcement committee is of the opinion that the law has been contravened, it may impose unlimited penalties on the wrong doers . In addition all forms market abuse are criminal offenses and an offender maybe prosecuted by the Director of Public prosecution of the NPA.

THE ROLE OF IPSA

The general feeling is that some of these organizations are not as effective as they ought to be, at times they have been called toothless dogs, there are a number of reasons that contributes to this which includes:

    • Inadequate legislation or laws that are in line with international standards
    • Less expertise and understanding due to the complexity of the securities and investment industry.
    • Less ability to enforce existing laws and regulations due to legal limitation. (Extra Territorial Jurisdiction matters)

It is therefore very important to understand the role of IPSA as a non-governmental, non-profit organization that in an effort to promote capital formation through financial and Capital Markets through public participation as part of economic growth, IPSA works hand in hand with these relevant organizations, agencies and entities in order to achieve its aims and objectives.

  • Provide with free legal and none legal opinions where necessary in matters relating to securities regulation and investments frauds.

 

  • Where there is a clear violation of securities regulations or investment fraud and the FSB is failing to do something about it IPSA able to call upon all affected investors to come forward and assist with remedial action in the relevant forums for free.

 

  • IPSA is able to bring an action in any appropriate forum to interdict any issuer of securities from trading or selling any of its securities, either on a Stock exchange or through the over the counter markets, where there is evidence of non-compliance, the employment of manipulation and deception or fraudulent methods in their prospectus., where it has been established that there was no full disclosures, or the issuer is not complying with the continuous disclosure requirements and the failure may result into financial loss to the investing public and the FSB is failing to do anything about it.

 

  • Advocating for the creation of the investment fund: a fund which capital markets participants will make a contribution and set aside for compensation to investors who lose money through investment schemes and securities fraud.

 

The office of the Register of companies.

Ensuring that this office adequately understands its    mandate and role while registering prospectus for issuers.

Proving them with free and

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