Declaration of Crypto Assets as a financial product


The Financial Sector Conduct Authority (FSCA) has published the declaration of Crypto
Assets as a financial product under the FAIS Act, which was gazetted on 19 October 2022.
The declaration, brings providers of financial services in relation to crypto assets within the
FSCA’s regulatory jurisdiction.

On 20 November 2020, the FSCA published a draft Declaration of Crypto Assets as a
Financial product under the FAIS Act, for public consultation. A total of 94 individual
comments were received from 22 different commentators. Following this public
consultation process, the FSCA published the final Declaration in the Government Gazette
and on the FSCA’s website.

The FSCA has also published a Policy Document supporting the Declaration. The Policy
Document provides clarity on the effect of the Declaration, including transitional provisions,
and the approach the FSCA is taking in establishing a regulatory and licensing framework
that would be applicable to Financial Services Providers (FSPs) that provide financial
services in relation to Crypto Assets.

In addition to the Declaration and Policy Document, the Authority also published a general
exemption for persons rendering financial services (advice and/or intermediary services) in
relation to Crypto Assets, from section 7(1) of the FAIS Act.

The intention of the exemption is the following:

• To facilitate transitional arrangements for existing providers of crypto asset
activities. The transitional arrangements entail that a person may continue to
render financial services in relation to crypto assets without being licensed,
provided that such person applies for a licence under the FAIS Act within the
period specified in the exemption. The stipulated period is 1 June 2023 until 30
November 2022. The exemption will apply until the licence application submitted
has been approved or declined; and
• To exempt certain ecosystem participants from the FAIS Act. These participants
are crypto asset miners and node operators performing functions in respect of
the security and health of the network as well as persons rendering financial
services in relation to non-fungible tokens1.

To facilitate the application of an appropriate regulatory framework for Crypto Asset FSPs
once licensed, the FSCA also published a Draft Exemption of Persons rendering Financial
Services in relation to Crypto Assets from Certain Requirements. The draft exemption
proposes to exempt licensed Crypto Asset FSPs and their key individuals and
representatives from certain requirements of, amongst others, the General Code of
Conduct for Authorised Financial Services Providers (General Code) and their
Representatives and the Determination of Fit and Proper Requirements, 2017 (Fit and
Proper requirements). Requirements contained in the General Code and Fit and Proper
requirements will apply to all Crypto Asset FSP’s once licensed, except those requirements
that they are exempted from in terms of the draft General Exemption.

The draft General Exemption has been published for public comment pending finalisation,
to solicit stakeholder inputs on the proposed regulatory framework that will apply to licensed Crypto Asset FSP’s. Submissions on the draft Exemption must be made using the
submission template available on the FSCA’s website and be submitted in writing on or
before 1 December 2022 to the FSCA at


Enquiries: Financial Sector Conduct Authority
Email address:
Telephone: 0800 203 722

1The terms crypto asset miner, node operator and non-fungible token are defined in the published Exemption of persons rendering financial services in relation to crypto assets from section 7(1) of the Financial Advisory and Intermediary Services Act, 2002.

Crypto assets now included under definition of financial products in South Africa


By Ashlin Perumall, Partner, Baker McKenzie Johannesburg

FSCA Declaration
Crypto assets are now regulated as financial products in South Africa. On 19 October 2022, the Financial Sector Conduct Authority (“FSCA”), South Africa’s financial institutions regulator, issued a declaration (“Declaration“) that crypto assets are now included under the definition of ‘financial products’ in terms of the Financial Advisory and Intermediary Services Act, 2002 (“FAIS”). The Declaration also provides a wide definition for crypto assets, being a digital representation of value that:

  • is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment or other forms of utility;
  • applies cryptographic techniques; and
  • uses distributed ledger technology.

The effect of the Declaration is that any person who provides advice or renders intermediary services in relation to crypto assets must be authorised under the FAIS Act as a financial services provider, and must comply with the requirements of the FAIS Act. Under FAIS, ‘advice’ includes recommendations, guidance or proposals of a financial nature furnished by any means or medium in respect of a defined financial product. ‘Intermediary service’ includes any act other than the furnishing of advice, performed by a person for or on behalf of a client or product supplier with a view to:

  • buying, selling or otherwise dealing in (whether on a discretionary or non-discretionary basis), managing, administering, keeping in safe custody, maintaining or servicing a financial product purchased by a client from a product supplier or in which the client has invested;
  • collecting or accounting for premiums or other moneys payable by the client to a product supplier in respect of a financial product; or
  • receiving, submitting or processing the claims of a client against a product supplier.

Exemption Application
Ordinarily, in terms of section 7 of FAIS, a person may not act or offer to act as a financial services provider unless such person has been issued with a licence by the FSCA. The FSCA has set applicable licences which an FSP would generally require, which are divided into different categories of licences. The full list of categories can be found here. However, on 19 October 2022, the FSCA also published notice 90 of 2022 exempting certain persons who render a financial service in relation to crypto assets from the application of section 7(1) of FAIS. In order for the exemption to apply, the relevant persons are required to comply with the following:

  1. submit an application to the FSCA between 1 June 2023 and 30 November 2023
  2. comply with:
    1. chapter 2 of the Determination of Fit and Proper Requirements for Financial Services Providers, 2017
    2. section 2 of the General Code of Conduct (“GCC”)
    3. all other requirements in the GCC excluding section 13.

The exemption is also subject to the condition that the relevant applicant must provide the FSCA with any information it requests that is in the possession of, or under the control of, the applicant, that is relevant to the financial services and/or similar activities rendered by such applicant. This application must be made by persons seeking an exemption by 1 December 2023. This exemption excludes persons categorised as crypto asset miners, node operators, and financial services in relation to non-fungible tokens, in respect of whom it is already deemed to apply.

As can be seen from the breadth of the legislative framework underpinning ‘financial products’ under FAIS, the consequences of the Declaration will be far reaching, and will impact many businesses in South Africa dealing in crypto assets. When the draft of the Declaration was published in November 2020, it was noted that the intention behind the Declaration was to capture intermediaries that advise on or sell crypto assets to consumers, so as to provide adequate protection for consumers who are advised to purchase these products. Businesses in this space that have until now been operating in a largely unregulated environment will need to move quickly to become compliant.


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IOSCO issues regulatory measures to address increasing risks and challenges from digitalisation of retail marketing and distribution


The Board of the International Organization of Securities Commissions (IOSCO) today published measures that members should consider when determining their policy and enforcement approaches to retail online offerings and marketing.

The measures outlined in the Final Report on Retail Distribution and Digitalisation aim to assist IOSCO members in adapting their regulatory and enforcement approaches, consistent with their legal and regulatory frameworks, to meet the growing challenges posed by rapidly evolving digitalisation and online activities.

The Report presents a toolkit of policy measures to help members address risks that may arise and a toolkit of enforcement measures that leverage a range of powers and technology-based investigatory techniques and enhanced collaboration with other authorities and providers of electronic intermediary services.

The policy toolkit measures relate to:

Firm level rules for online marketing and distribution;

Firm level rules for online onboarding;

Responsibility for online marketing;

Capacity for surveillance and supervision of online marketing and distribution;

Staff qualification and/or licensing requirements for online marketing;

Ensuring compliance with third country regulations; and

Clarity about legal entities using internet domains.

The enforcement toolkit measures relate to:

Proactive technology-based detection and investigatory techniques;

Powers to promptly take action where websites are used to conduct illegal securities and derivatives activity and other powers effective in curbing online misconduct;

Increasing efficient international cooperation and liaising with criminal authorities and other local and foreign partners;

Promoting enhanced understanding and efforts by, and collaboration with, providers of electronic intermediary services regarding digital illegal activities; and

Additional efforts to address regulatory and supervisory arbitrage.

Digitalisation and social media are changing the way financial services and products are marketed and distributed to retail investors, providing greater opportunities for firms to reach a broader investor base and for retail investors to access a wider range of products. Digitalisation and social media also present risks associated with the use of behavioral and gamification techniques and financial influencers (finfluencers) that impact retail investor trading behavior.

Developments in digital offerings, including use of new complex products such as crypto-assets, also give rise to novel regulatory and investor protection challenges, spanning the whole distribution chain. As digitalisation trends evolve faster than regulatory frameworks, there is a risk that retail investors could be exposed to harmful or even fraudulent online activity.

The Report analyses global developments in online marketing and distribution of financial products to retail investors and discusses enforcement challenges encountered by regulators. It sets out examples of how some member jurisdictions have addressed these issues.

The Report is part of IOSCO’s efforts to build trust and confidence in markets facing new and emerging opportunities and risks. The overarching objective is to enhance the protection of retail investors, the main recipients of online offerings and marketing techniques.

The rapidly evolving environment demonstrates the need for an increased regulatory focus on digital marketing and offerings and for efficient collaboration, on both a domestic and cross-border level, to promote a high level of investor protection at a global scale. 

Responding to the IOSCO Report, Martin Moloney, the IOSCO Secretary General, said: A digital revolution is sweeping the world of finance. Financial product offerings and customer on-boarding practices are no exception to this change. This revolution allows firms to refine the techniques they use in their digital marketing. While that innovation promises to provide investors with well targeted information, it also creates new risks to investors via systemic targeting and unsolicited offerings, sometimes underpinned by gamification and ‘finfluencer’ activity that is not always helpful to investors. Digital fraudsters can hide behind a “digital veil” that makes it difficult for regulators to locate, identify and take action against them. We are publishing this policy and enforcement guidance, built up from the experience of our members, to respond to the complex conduct challenges in today’s digital world, and to achieve better financial consumer outcomes.”


IOSCO is the leading international policy forum for securities regulators and is recognized as the global standard setter for securities regulation. The organisation’s membership regulates more than 95% of the world’s securities markets in some 130 jurisdictions, and it continues to expand.

The IOSCO Board is the governing and standard-setting body of IOSCO and is made up of 34 securities regulators. Mr. Ashley Alder, the Chief Executive Officer of the Securities and Futures Commission of Hong Kong, is the Chair of the IOSCO Board. The members of the IOSCO Board are the securities regulatory authorities of Argentina, Australia, Bahamas, Belgium, Brazil, China, Egypt, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Kenya, Korea, Malaysia, Mexico, Morocco, Nigeria, Ontario, Pakistan, Portugal, Quebec, Russia, Saudi Arabia, Singapore, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States of America (both the U.S. Commodity Futures Trading Commission and U.S. Securities and Exchange Commission). The Chair of the European Securities and Markets Authority and the Chair of IOSCO´s Affiliate Members Consultative Committee are also observers.

The Growth and Emerging Markets (GEM) Committee is the largest committee within IOSCO, representing more than 75% per cent of the IOSCO membership, including 10 of the G20 members. Dr Mohamed Farid Saleh, Executive Chairman of the Financial Regulatory Authority, Egypt is Chair of the GEM Committee. The committee brings members from growth and emerging markets together and communicates members’ views and facilitates their contribution across IOSCO and at other global regulatory discussions. The GEM Committee’s strategic priorities are focused, amongst others, on risks and vulnerabilities assessments, policy and development work affecting emerging markets, and regulatory capacity building.

IOSCO aims through its permanent structures:

to cooperate in developing, implementing and promoting internationally recognized and consistent standards of regulation, oversight and enforcement to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;

to enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and 

to exchange information at both global and regional levels on their respective experiences to assist the development of markets, strengthen market infrastructure and implement appropriate regulation.


Carlta Vitzthum                                                                        + 34 91 787 0419/

Outside office hours                                                                 + 34 697 449 639        



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Opinion piece: Avoiding FATF suspension depends on data.

By Gary Allemann, MD at Master Data Management

South Africa is the only permanent African member of the Financial Action Task Force (FATF), the global anti-money laundering watchdog. This is why it came as a shock to hear that the country is close to being grey-listed following concerns raised by the global body.

Basically, FATF membership helps to streamline the movement of money across borders by guaranteeing that the parties involved in a transaction are above board. In South Africa, for example, most of us will be familiar with the Financial Intelligence Centre Act (FICA) – the regulations requiring banks and other parties to confirm an entity’s identification and physical address.

This information is then used to ensure that the person (or company) is legitimate (by comparing to international sanctions lists) and to build a risk profile that can flag suspicious transactions – for example, if an amount of money is being moved for a purpose that is not in line with the company’s historical business.

Initially targeting banks, FICA has been expanded to affect various sectors where assets change hands, such as insurance, real estate and law, meaning that the Financial Intelligence Centre is able to build a more complete picture of each individual transacting in the country.

Systemic issues

Recently, the South African government announced a draft of amendments and additions to key Anti-Money Laundering (AML) laws, including the above-mentioned FICA, to address systemic issues – the culture of state capture and corruption – that have been raised as concerns by FATF. We have also tabled a new bill.

In most cases, these changes seek to make it more difficult for individuals to hide their identity behind complex structures and are certainly a step in the right direction. Yet, correctly identifying individuals at account creation is only part of the problem.

Dealing with data uncertainty

Earlier this year, A-team Insights hosted a roundtable discussion exploring the topic of adding value and improving efficiency in sanctions screening. The roundtable left participants with two key take aways:

Sanctions screening is becoming more complex

Data transparency is essential

To guarantee sanction screening, financial institutions must have access to two rapidly changing sets of reference data. The first is an explicit list of individuals and entities that are directly sanctioned. The second, more complex list, is the set of entities with implicit sanctions. Typically, this means entities that have a majority shareholding from sanctioned individuals.

Screening tools compare internal customer lists to the above-mentioned reference lists. But these tools can only be as effective as the data passed to them. Maintaining the integrity of internal AML data is, of course, a step in the right direction, particularly for dealing with explicitly sanctioned individuals.

Implicitly sanctioned entities are harder to identify. While the regulatory changes mentioned aim to make it more difficult to hide ownership structures, investments in new technologies such as graph MDM are required to uncover hidden relationships between entities.

Dealing with transactions

Another huge data challenge is that of identifying sanctioned activities at the transactional level. Millions of cross-border transactions take place per day – via SWIFT, PayPal, and various mobile payment mechanisms. In each case, the transaction should record a sending and receiving party, the purpose for which the funds are being transferred, and the amount.

Financial institutions may have an accurate record for the sending party (their customer) but must now accurately identify and verify the receiving party – i.e. run them through sanctions screening – and must identify the transaction amount and purpose in order to flag suspicious transactions.

The sheer volume of transactions presents the first challenge – for large organisations, these can run into millions of transactions a day.

Data integrity is the second challenge. Transactions with fraudulent intent will typically make an effort to hide the identity of the receiving party – for example, by excluding some details or by misspelling a name. These minor variations make it hard to accurately identify sanctioned individuals.

One international banking group turned to big data technologies to address two key AML challenges:

Identifying money moving silently between joint account holders

Managing exploits related to poorly formatted SWIFT messages.

The bank uses Trillium for Big Data to prepare and validate SWIFT messages – ensuring that each record is broken into its key elements, which are each standardised and validated. Each transaction is then checked against external reference sources such as international anti-terrorism lists. By enhancing their big data platform with in-built data quality, the bank is now able to process and validate hundreds of millions of transactions daily, significantly reducing their AML risk.

Take action to avoid grey-listing

As a country, we need to take urgent action to avoid FATF grey-listing. The government certainly is part of the problem, but at least appears to be taking concrete steps to address concerns. Corporate South Africa must also show intent by investing in the data management infrastructure necessary to ensure compliance.

Editorial Contacts

Master Data Management

Gary Allemann

Tel: 011 485 4856


Evolution PR

Charlote Hlangwane

Tel: 076 891 1464 Email:

IOSCO publishes a final report presenting supervisory practices across its members to address greenwashing

The Board of the International Organization of Securities Commissions (IOSCO) has published on 4 December 2023 a report on Supervisory Practices to Address Greenwashing.

The Report provides an overview of initiatives undertaken in various jurisdictions to address greenwashing, in line with IOSCO recommendations published in November 20211,2 and the subsequent Call for Action3 in November 2022. The Report presents the challenges hindering the implementation of these recommendations, including data gaps, transparency, quality, and reliability of ESG ratings, consistency in labelling and classification of sustainability-related products, evolving regulatory approaches, and capacity building needs. While some of these challenges are currently being addressed, greenwashing remains a fundamental market conduct concern that poses risks to both investor protection and market integrity.

Jean Paul Servais, IOSCO Board Chair said “In recent years, there has been a growing recognition of the economic and financial materiality of climate change and ESG considerations. But there is also a growing concern against misleading claims about ESG risks, opportunities, and impacts. Internationally, industry participants, investors, regulators, and policy makers have stepped up their efforts to address such risks of greenwashing. It is key to promote cultures that support good practices aimed at protecting investors and fostering market integrity. The Report supports regulators address greenwashing by outlining current regulatory best practices from around the world.”

Rodrigo Buenaventura, IOSCO Sustainability Task Force Chair and Chairman of CNMV Spain, said: “Greenwashing can occur throughout the investment value chain, and any market participant – from issuers to asset managers to ESG ratings and data products providers – can engage in this behaviour. Taken more broadly, greenwashing undermines the fundamental trust in sustainable finance. To ensure a healthy global sustainable finance market, there is a need for reliable, consistent, and comparable sustainability related information, while related ESG products should be marketed and managed in a way that does not undermine investors’ trust.”

The Report notes that most jurisdictions have in place supervisory mechanisms to address greenwashing in the area of asset management. Educational and capacity building activities are also used as proactive tools to prevent greenwashing. Furthermore, the Report refers to some enforcement measures which have been taken on a few greenwashing cases. The Report also notes that while the ESG ratings and data products market remains largely unregulated, some jurisdictions are currently developing policy frameworks for ESG ratings and data products providers. Finally, the Report refers to the cross-border nature of sustainability-related investments which requires adequate cooperation. Such cross-border cooperation, including sharing experiences and knowledge, as well as exchanging relevant information and data, is therefore necessary in ensuring market integrity and investor protection.

Grant Vingoe, CEO of the Ontario Securities Commission, Canada and STF Promoting Good Practices Co-Chair, said: “Whether intentional or not, greenwashing negatively impacts investor confidence. Supervisors have a key role to play by ensuring that there are responsible risk monitoring and management processes in place, and by promoting decision-useful information for investors. In doing so, supervisors can help foster a culture that will prevent harm and promote investor confidence in sustainable finance.”

Dr Mohamed Farid Saleh, Executive Chairman, Financial Regulatory Authority, Egypt and STF Promoting Good Practices Co-chair, said: “The ability to address greenwashing is also a matter of capacity. Jurisdictions, notably from emerging markets, will require assistance for both designing and executing their action plans towards any net zero commitment, and more concretely, for implementing new corporate sustainability requirements and new or enhanced supervisory practices. Greenwashing will remain to pose risks to the global sustainable finance markets until the quality and reliability of information available to investors improve. All stakeholders will therefore need to act in concert to combat greenwashing, building a more reliable ecosystem to ensure trust in sustainable finance markets.”


IOSCO finalizes its policy recommendations for crypto and digital asset markets


IOSCO, the global standard setter for securities market regulators, has on 16 November 2023 published its Final Report with Policy Recommendations for Crypto and Digital Asset (CDA) Markets.

These recommendations are central to the delivery of a coordinated global regulatory response to the significant investor protection and market integrity risks posed by centralized crypto-asset intermediaries called crypto asset service providers (CASPs).

IOSCO’s detailed and targeted recommendations elaborate the regulatory expectations, either through application of existing rules or development of new rules, depending on the jurisdiction, to address the key areas of harm observed in these markets.

The CDA Recommendations set a clear and robust international regulatory baseline to ensure that CASPs meet the standards of business conduct that apply in traditional financial markets.

The Recommendations cover six key areas, consistent with the IOSCO Objectives and Principles for Securities Regulation and relevant supporting IOSCO standards, recommendations, and good practices:

  1. Conflicts of interest arising from vertical integration of activities and functions,
  2. Market manipulation, insider trading and fraud,
  3. Custody and client asset protection,
  4. Cross-border risks and regulatory cooperation,
  5. Operational and technological risk, and
  6. Retail distribution.

Jean-Paul Servais, IOSCO Chair said:

As IOSCO chair, I am pleased with the publication of the IOSCO Report on Crypto and Digital Asset Markets which is the first and important step to ensure investors are protected and crypto-asset markets operate fairly, efficiently and transparently. This report is a key component of the international framework for these markets envisaged by the G20 and FSB.

Next, our attention turns to ensuring the adoption and implementation of the recommendations to support optimal consistency in the way crypto-asset markets and activities are regulated across IOSCO member jurisdictions.

Tuang Lee Lim, Chair of the IOSCO Board-Level Fintech Task Force, set up to develop the policy measures, said:

The activities of CASPs and their associated risks frequently mirror those observed in traditional financial markets. The regulatory approach taken is therefore consistent with IOSCO’s Principles and associated standards for securities markets regulation.

These 18 recommendations for crypto and digital asset markets are outcomes-focused and based on the principle of “same activity, same risk, same regulatory outcome”.

New Johannesburg Stock Exchange rules to encourage listings

By Lydia Shadrach-Razzino, Partner, Co-head of the Corporate/M&A Practice, Tanya Seitz, Director Designate, and Shamila Mpinga, Candidate Attorney, Corporate/M&A, Baker McKenzie Johannesburg

The Johannesburg Stock Exchange (JSE) has seen listings halve in the past two decades, from 616 in 2000 to just below 300 in 2023. This is likely a result of reduced foreign investments in the country due to the unfavourable global macroeconomic climate. However, some analysts have noted that the JSE’s listing requirements are onerous and have arguably led to increased compliance costs and an unprecedented number of delistings in the past five years. While delistings are an ordinary part of capital markets, the scarcity of new listings is a cause for concern. 

One of the main reasons companies list on the main board of the JSE is to raise capital. However, issuers have been less optimistic about the prospects of raising capital on the JSE, as many have been trading at double-digit discounts to their net asset values. This has significantly reduced the attractiveness of the JSE to private companies, hence its current efforts to encourage listings. The JSE has announced numerous changes to its listing requirements to encourage new entrants and prevent delistings, with the most recent of these changes becoming effective as of 17 July 2023.

The changes to its listing requirements include (i) the introduction of dual-class share structures; (ii) the reduction of free float for new listings; (iii) changes to free float assessments for institutional investors; (iv) changes to the listing requirements for special purpose acquisition companies (SPACs); and (v) making financial reporting disclosures less onerous. Although the changes have been well received by market participants as a means to encourage new listings, they appear to be more geared towards attracting IPOs rather than adding significant value for existing issuers. Finally, in September 2023, the JSE announced its intention to completely overhaul the JSE Listings Requirements (Requirements) in an attempt at simplifying the Requirements and cutting red tape, which is welcomed. 

Dual-class shares

In essence, dual-class share structures exist where a shareholder’s voting control over a company is disproportionate to their economic interest in that company. A dual-class share structure typically involves a company having two classes of shares that are identical in every respect except for voting rights. One class of shares is a “low vote” share, carrying one vote per share (typically Class A shares), while the other class of shares is a “high vote” share, typically carrying 10 or 20 votes per share (typically Class B shares). Prior to the current amendments, the JSE did not allow companies with dual-class shares to list on the exchange. It also prohibited existing listed companies from issuing dual-class shares. An exemption applies to companies with dual-class shares that were listed before 1999. These exempted companies were allowed to issue additional shares of that class. The amendments relating to dual-class shares are forward-looking and apply to new listings. They do not affect companies that are already listed.

A major concern associated with dual-class share structures is the concentration of power in the hands of management with little to no shareholder oversight. This could lead to dubious corporate governance practices, which makes it important for shareholders to maintain a watchful eye over these companies.

The JSE’s introduction of dual-class shares as “weighted voting shares” has been widely accepted, subject to guardrails to mitigate the abovementioned risks. These include (i) requiring a maximum weighted ratio of 20:1; (ii) requiring that dual class shares be held only by directors of the company; and (iii) capping all shares to one vote regardless of the class for certain matters, such as changes to independent directors and auditors, variation of rights attaching to any class of shares, a reverse takeover, liquidation, or delisting. Dual-class share structures are commonplace on stock exchanges globally, as seen on the New York Stock Exchange, the Nasdaq, and the Toronto Stock Exchange. What remains to be seen is whether there is investment appetite for companies with dual-class share structures on the JSE.

Free float and new listings

Free float refers to a company’s issued share capital that is held by public investors. Prior to the amendment, the JSE required main board issuers to have a free float of 20%. To keep abreast of international developments in Europe and to encourage new listings, the JSE has reduced the free float requirement to 10%. Making a large portion of the company’s shares freely tradeable can be unsettling, particularly for large companies where there are few shareholders willing to sell their shares. Therefore, this is great news for high-growth companies and those with private equity and venture capital investors, which consider free-float requirements a strong deterrent when considering where to list.

Reducing the free float requirement to 10% will allow new issuers flexibility to structure their IPOs and open markets to issuers wishing to initially raise smaller amounts of equity. The requirement to float 10% is in line with other local exchanges, such as the Cape Town Stock Exchange, thereby making the JSE competitive in the local market. The fact that the free float requirement has been largely unchanged for over 20 years has been detrimental for Africa’s largest exchange. It has impacted the JSE’s competitiveness as a primary and secondary listing jurisdiction. For instance, it is strange that companies that were compliant on premier international exchanges would fall short of qualifying for a secondary listing on the JSE for failing to float 20% of their shares. Therefore, this change is a move in the right direction as it reduces the burden of shareholder dilution.

Institutional investors and free float assessment

There are limited security holdings that qualify as free float. One type of holding that previously did not qualify was a shareholding of 10% or more. This was not ideal given that it is common for institutional investors, such as fund managers and portfolio managers, to hold more than 10% of an applicant issuer on listing. As an exception, the JSE allowed institutional investor holdings of more than 10% to qualify as free float. The exemption applied where the interest held was in more than one fund and each fund held less than 10% of the shares in the applicant issuer. This exemption was not the saving grace that it set out to be, as it was rather limited and complex to apply. Therefore, the JSE has resolved to change the rules to recognize institutional investors for free float purposes, provided they have no relationship whatsoever with the directors and family of the applicant issuer.

The JSE has widened the scope for free-float assessments in two major ways. Firstly, the JSE has removed the 10% exclusion altogether, provided there is a minimum number of shareholders. Requiring a minimum number of shareholders will ensure that the floated shares are not held by only one shareholder and will encourage a competitive share price. The JSE’s second amendment is to exclude shareholders who exercise control (>35%) from the free float assessment. Given that 90% of monthly trades on the JSE are driven by institutional investors, they will benefit significantly from this amendment.

Additional amendments: SPACS and Financial Reporting Disclosures

In its efforts to retain and attract listings, the JSE has amended its requirements relating to financial reporting disclosures and SPACS, respectively.

The JSE introduced SPACS in 2013. This type of company is primarily incorporated to raise capital to acquire viable assets with the aim of listing on an exchange. Viable assets are those that qualify for a listing on an exchange. SPACS are a viable investment vehicle and become more attractive in a volatile economic environment when traditional listings become riskier. We witnessed this SPAC boom in 2020 and 2021, when the markets became volatile during the COVID-19 pandemic. Global interest in SPACS has since dwindled. Despite the reduced interest, the JSE has amended its requirements to make SPACS more attractive for listings, should the demand for SPACS increase.

To retain listings, the JSE has reduced the compliance burden for issuers. Issuers will no longer have to produce an abridged version of their financial results along with their audited annual financial statements. Furthermore, issuers’ interim results will no longer have to include an auditor’s opinion, where the previous set of annual results were accompanied by a modified opinion. The JSE has admitted that the previously mandated financial reporting disclosures added no regulatory value or benefit to investors. As such, these amendments have received overwhelming support.

Simplification project

The JSE has announced its intention to simplify the Requirements. Essentially, the JSE plans to rewrite the Requirements using plain language for the benefit of all stakeholders. This process will include a substantial reduction in the volume of the Requirements and cutting red tape to ensure that only rules that are fit for purpose survive the purge. The JSE has created a dedicated portal for this project, which will run in stages over 18 months, including public participation throughout the process. We look forward to reviewing the suggested amendments.

Final thoughts

The JSE certainly has its work cut out for it, particularly given the rise of other exchanges locally and the success of private equity and venture capital financing in South Africa. With less stringent compliance burdens, competitor exchanges and alternative forms of financing have become more attractive methods of raising capital, thus posing a challenge for the JSE.

In its efforts to encourage new listings and curb delistings, the JSE, through its initiatives to cut red tape, must find a balance between reducing compliance burdens and protecting investors. The previous listing requirements had been in place for over 20 years. Therefore, the recent changes are testament to the JSE’s commitment to self-assessment and improvement to encourage capital market reform.

Coupled with the recent amendments to the Requirements, the complete overhaul of the Requirements presents an opportunity for the JSE to reform and regulate listings in a manner that accommodates potential issuers, listed companies, sponsors, shareholders and investors. Balancing these interests is no small feat, but by engaging market participants, the JSE can allay such challenges and pave the path for a renewed JSE that can withstand the cyclical nature of global economic conditions.

Precedent-setting case regarding Financial Service Providers’ duty of care to protect clients from cybercrime

A Dispute Resolution team from Baker McKenzie in Johannesburg, including Darryl Bernstein, Kylie Slambert, Cameron Jeffrey and Landise Banzana, successfully represented the Rosebank Rotary Club (RRC) on a pro bono basis in a precedent-setting case relating to the conduct of financial service providers (FSPs) and their duty of care to safeguard their clients’ finances and protect them against cybercrime. The case involved an ongoing dispute involving the RRC and a financial investment firm, Brough Capital (Brough), and its director, Chris Botha (Botha). The decision, which was delivered in the Commercial Court, has implications for all accountable financial institutions.

Botha is a director, Representative and Key Individual of Broughas defined by the Financial Advisory and Intermediary Services Act (FAIS). According to the FAIS Act, Key Individuals have a fiduciary responsibility to ensure that they perform their duties with the necessary care, skill and diligence. FAIS, as well as the General Code of Conduct for Authorised FSPs, requires that FSPs have appropriate technological systems in place that eliminate, as far as reasonably possible, the risk that clients and other FSPs will suffer through, amongst other things, fraud, negligence, or professional misconduct.

The dispute arose out of the misappropriation of funds, totalling ZAR 3.1 million, invested by the RRC via Brough and Botha. The funds were misappropriated as a result of a business email compromise in the form of fraudulent emails sent by unknown hackers purporting to be withdrawal instructions from RRC, to Brough. The Court, in considering the matter, found that Brough did not take adequate measures to prevent the misappropriation from occurring, nor did Botha, both being bound by the legislation and guidelines governing the conduct of intermediary service providers. It was decided that the defendants failed to comply with the duties of an FSP and were guilty of gross negligence, flowing from the manner in which they dealt with the withdrawal instructions from the unknown hackers. Of particular relevance was the fact that the defendants:

  • Ignored errors on the change of bank account letters, including that RRC’s name was not written in full and that the logo of the respective bank was missing from the letter; and
  • Ignored the unusual nature of the withdrawals, which were large sums of money drawn in short succession and without notice.

The Court considered the fact that had Botha paid careful attention to the purported letter from the bank, it would have revealed that it was not the plaintiff’s bank account but that of a “Rotary Club” with no name. Further, the Court noted that Botha should have considered the history of the withdrawals from his client and taken time to understand their business insofar as enquiring what the funds were for. The judgment noted that the defendants had failed to exercise the necessary skills, care and diligence, as well as their contractual obligation to be vigilant. The Court found that they had been grossly negligent.

The defendants were found jointly liable to pay the plaintiff ZAR 3.1 million at 10.5% interest per annum, plus costs.

Darryl Bernstein, Partner and Head of the Dispute Resolution Practice in Johannesburg, noted, “This judgment highlights the importance of the responsibility placed on FSPs, as well as those individuals under the supervision of the respective FSPs, to be extra vigilant in an era where cybercrime is rife. It further places great importance on functioning internal controls, such as two-step verification processes, to avoid, as far as possible, the promulgation of cybercrimes and to prevent gross negligence. The judgment is also a reminder to intermediary service providers that, even in instances where the funds are administered by a third party, the proverbial buck stops with the FSP with whom the client has a contractual relationship.”

Competition Commission’s draft public interest guidelines for mergers published for public comment

By Mark Garden and Elisha Bhugwandeen


Businesses have anxiously been seeking clarity on the application of public interest conditions in merger transactions. It is anticipated that the Competition Commission’s draft public interest guidelines for mergers will provide some clarity on its approach to public interest considerations in the context of merger regulation.

The South African Competition Commission (the Commission) released the Draft Revised Public Interest Guidelines (draft guidelines) on the first day of its 17th Annual Competition Law, Economics and Policy Conference. These draft guidelines are intended to indicate the approach that the Commission may adopt and the type of information the Commission may require when evaluating the public interest factors in section 12A(3) of the Act.

Merger control

Since the amendment of the Competition Act (89 of 1998) a few years ago, the public interest component of merger regulation has achieved prominence. Over the 2021/22 financial year, at least a quarter of all mergers were approved subject to public interest conditions. As a result, businesses have been eager for clearer guidance from the competition authorities on when public interest conditions will be applied and how these conditions should be structured.

Merger control in South Africa is, in part, governed by the public interest considerations set out in section 12A(3) of the Competition Act. These considerations must be read alongside and given equal weight to the traditional assessment of a merger’s effect on competition in the relevant market. Section 12A(3) provides that, when determining whether a merger can be justified on public interest grounds, the competition authorities must consider the effect that the merger will have on:

  • a particular industrial sector or region;
  • employment;
  • the ability of small and medium businesses, or firms controlled by or owned by historically disadvantaged persons, to effectively enter into, participate in or expand within the market;
  • the ability of national industries to compete in international markets; and
  • the promotion of a greater spread of ownership, to increase the levels of ownership by historically disadvantaged persons, workers and firms in the market.

HDP requirement

The section 12A(3)(e) requirement, introduced via a legislative amendment in 2019, that a merger must promote a greater spread of ownership by historically disadvantaged persons (HDPs) and workers, has been the subject of much scrutiny. HDPs are defined in the Act as a category of individuals who were disadvantaged by unfair discrimination based on race, prior to the enactment of the Interim Constitution, including organisations that are controlled by HDPs.

While the draft guidelines discuss the Commission’s approach to each public interest consideration, potential merger parties will be particularly interested in the Commission’s interpretation of section 12A(3)(e), and how it interacts with the rest of the considerations.

At the outset, the Commission makes it clear that section 12A(3)(e) enjoys a unique status amongst the other public interest considerations as it is the only consideration to impose a positive obligation on merging parties. Accordingly, the starting point of the Commission’s merger assessment will be that all mergers are required to promote a greater spread of ownership. The Commission is explicit in noting that “a lack of promotion of ownership levels will not be considered to be responsive to this provision”.

The applicability of section 12A(3)(e) to mergers with a neutral effect on HDP and/or worker ownership (particularly foreign-to-foreign mergers) has been a grey area in the Commission’s application of section 12A(3)​(e). The draft guidelines seek to provide clarity by stating that the obligation to promote or increase a greater spread of ownership pertains to all mergers having an effect in South Africa. This suggests that mergers between two foreign-owned firms with limited South African operations may be required by the Commission to promote a greater spread of HDP and/or worker ownership.


Although the Commission’s guidelines, once adopted, will not have the status of enforceable legislation, they nevertheless provide a clear indication of how the Commission is likely to approach the public interest element of merger regulation in South Africa, and how it intends to marry the transformational imperatives that underscore the Competition Act with the requirement for greater certainty in merger regulation.

Interested parties have until 17 November 2023 to submit comments on the draft guidelines.

For further information on this topic please contact Mark Garden or Elisha Bhugwandeen at Webber Wentzel by telephone (+27 11 5305 000) or email ( or The Webber Wentzel website can be accessed at

Jamie Battersby assisted with the preparation of this article.

This article was originally published in the 19 October 2023 Newsletter of the International Law Office –

Tougher merger control enforcement – a trend here to stay?

Enrica Schaefer, Jenny Leahy, Rikki Haria and Jennifer Mellott

The 2024 edition of Getting the Deal Through: Merger Control has been published. This annual overview of global merger control has been led by Freshfields in partnership with Law Business Research for the past 28 years. The current edition covers the basic principles of merger control regulation in 59 jurisdictions worldwide. In this blog, we introduce the opening chapter which considers the key developments in the recent global shift towards tougher merger control enforcement—a trend that looks set to continue into 2024.

Over the past year, competition authorities globally have continued to make a move towards more stringent merger control enforcement. This follows an increasingly shared view among authorities and politicians across multiple jurisdictions that excessive consolidation in certain industries has been exacerbated in the past by a lenient approach to merger control enforcement. This overall trend has manifested itself in an increasing number of transactions being blocked, requiring remedies, or being abandoned by the merging parties.

Please click here to read the full article.

BIS report on the 2023 banking turmoil


The 2023 banking turmoil, which commenced in March 2023, stands as a significant system-wide banking crisis, unparalleled since the Great Financial Crisis (GFC), both in terms of its scale and scope. The crisis led to the failure of several banks and triggered a widespread loss of confidence in the resilience of banks, banking systems, and financial markets across multiple jurisdictions. Consequently, a range of public support measures was implemented in certain jurisdictions to mitigate the crisis’s impact. The report published by the Bank for International Settlements (BIS) on 5 October 2023 presents a comprehensive assessment of the causes of the banking turmoil, the regulatory and supervisory responses, and the preliminary lessons that have been learned from this crisis.

Enhancing Financial Transparency: Basel Committee’s Crypto Asset Disclosure Framework


The Basel Committee has issued a consultative document on the disclosure of crypto asset exposure, aiming to enhance transparency and market discipline. This initiative introduces proposed standardised disclosure templates in a dedicated chapter, DIS55: Cryptoasset Exposures, within the Basel Framework. These templates are set to streamline disclosures and reduce information disparities among banks and stakeholders. The Committee seeks input from the public and market participants, including Pillar 3 disclosure users and preparers, to refine this framework. Comments should be submitted here by 31 January 2024, with the option for confidentiality upon request.

Disclosure of crypto asset exposures

SAIFM engages with Regulators – Opportunity for Members

SAIFM took the opportunity to comment and make a submission on the Revised Draft Conduct Standard – Requirements relating to the provision of a benchmark (click here to read this submission).  The SAIFM submission focused specifically on the skills and fit and proper requirements proposed in the Draft Conduct Standard.  Due to our active participation in this regulatory process, we have been informed of the next steps, which is the issuing of a questionnaire to those utilizing, offering or contributing to benchmarks.  SAIFM urges all members who have relevant information to please complete the questionnaire and facilitate the effective regulation of our financial markets.  Click here for more information.

Request for your comments: Publication of Discussion Document – Development of a framework for the regulation and supervision of financial benchmarks

Dear Stakeholder,

We refer to your comments to the Financial Sector Conduct Authority (Authority) on the Revised Draft Conduct Standard – Requirements relating to the provision of a benchmark, as published for public consultation in November 2022.

This serves as notification that the Authority on 02 November 2023 published the following documents on the Authority’s website:

–              FSCA Communication 28 of 2023 (FM) – Publication of a Discussion Document on financial benchmarks and industry questionnaire – for public comment

–              Discussion Document – Development of a framework for the regulation and supervision of financial benchmarks – Request for input

–              Annexure A – Questionnaire – Discussion Document – Provision of a benchmark

The documents are available on the Authority’s website under Home > Regulatory Framework > Documents for Consultation > Capital Markets > 2023 or by clicking on the following link: Capital Markets

The FSCA Communication is also available under Home > Regulatory Framework > Industry Communication > Capital Markets > FSCA Communication or by clicking on the following link: Industry Communication

As an interested party in the developments related to the regulation and supervision of financial benchmarks in South Africa, you are invited to complete the Questionnaire set out in Annexure A published with the Discussion Document and submit same in Word format to the Authority via email to by 14 December 2023.

For further information regarding the FSCA Communication, please contact Roslynne van Wyk at

Copies of the documents are below:

FSCA Communication 28 of 2023 Discussion Document_Development of a framework for financial benchmark

Discussion Document – Development of a framework for financial benchmarks

Annexure A – Questionnaire_Discussion Document Development of a framework for financial benchmarks