Legality of trading in BEE shares – FSB sticking to its guns

FSB-logo-biznewsThe Financial Services Board has set the cat among OTC pigeons with its recent directive that those operating a marketplace for trading in pretty much any securities whatsoever will have to register by early next year – or cease trading. This has significant implications for over three quarter of a million owners of BEE shares that are traded on Over The Counter (OTC) markets operated by companies like Sasol, Vodacom, MTN, Imperial, Naspers and others which have made a market shares owned primarily by their Black employees.  But it’s not only BEE shares that are at risk of having tradeability ended. What about CFDs and other derivatives where a massive market is operated by IG Markets, Global Trader and others? I send a mail to the FSB’s Erris van Kerken for clarity. Here is his response. – AH   

From Erris van Kerken*

I read the transcript of  our interview, as well as the transcript of your subsequent interview with Mr Wilmot. Our communications department has recently published a question and answer document which you might find helpful.

The Q&A document tries to bring across the point that the proposed directive does not create new law in any manner whatsoever. It also tries to bring across the point that the securities laws are there for investor protection.

With regard to your query in the trailing email, the FSB’s policy is to not comment on any individual entity. I have copied the “exchange” and “securities” definition sections of the Financial Markets Act no 19 of 2012. (see below)

As mentioned in the Q&A document, the focus here is on the manner that trading takes place. If the manner of trading falls within the definition of an exchange as set out in the law, the entity must be licensed as such, because the law requires that.

If the entity facilitates trades in a manner which does not fall within the law’s definition of an exchange, it does not need to be licensed in terms of the law.

“exchange” means a person who constitutes, maintains and provides an infrastructure-

(a)        for bringing together buyers and sellers of securities;

(b)        for matching bids and offers for securities of multiple buyers and sellers; and

(c)        whereby a matched bid and offer for securities constitutes a transaction;

“securities” means-

(a)        listed and unlisted-

(i)         shares, depository receipts and other equivalent equities in public companies, other than shares in a share block company as defined in the Share Blocks Control Act, 1980 (Act No. 59 of 1980);

(ii)        debentures, and bonds issued by public companies, public state-owned enterprises, the South African Reserve Bank and the Government of the Republic of South Africa;

(iii)       derivative instruments;

(iv)       notes;

(v)        participatory interests in a collective investment scheme as defined in the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002), and units or any other form of participation in a foreign collective investment scheme approved by the Registrar of Collective Investment Schemes in terms of section 65 of that Act; and

(vi)       instruments based on an index;

(b)        units or any other form of participation in a collective investment scheme licensed or registered in a country other than the Republic;

(c)        the securities contemplated in paragraphs (a)(i) to (vi) and (b) that are listed on an external exchange;

(d)        an instrument similar to one or more of the securities contemplated in paragraphs (a) to (c) prescribed by the registrar to be a security for the purposes of this Act;

(e)        rights in the securities referred to in paragraphs (a) to (d), but excludes-

(i)         money market securities, except for the purposes of Chapter IV; or if prescribed by the registrar as contemplated in paragraph (d);

(ii)        the share capital of the South African Reserve Bank referred to in section 21 of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989); and

(iii)       any security contemplated in paragraph (a) prescribed by the registrar;


 

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