The International Organization of Securities Commissions (IOSCO) has recently released a series of important reports addressing key areas of global market functioning and regulatory development. These publications—spanning valuation practices for collective investment schemes, the tokenization of financial assets, and transparency within the single-name credit default swaps market—reflect IOSCO’s continued commitment to strengthening market integrity, enhancing investor protection and responding proactively to evolving market structures.

Each report provides valuable insights relevant to regulators, market participants and stakeholders across South Africa’s financial markets. Below is a high-level introduction to each topic, with links to the full reports for further reading.

1. Valuation Practices for Collective Investment Schemes

IOSCO’s Consultation Report on Valuing Collective Investment Schemes proposes updated recommendations to modernise its existing valuation principles in light of significant market developments since 2007 and 2013. With CISs increasingly exposed to less liquid and alternative assets—and retail participation growing—robust valuation practices remain essential to ensuring accurate NAV calculations, fair investor outcomes, and overall confidence in the asset management ecosystem.

The consultation seeks feedback on 13 updated recommendations covering governance, oversight, conflicts of interest, stressed-market conditions, third-party service providers, stale prices and record-keeping.

Read the full article here.

2. Tokenization of Financial Assets

In its Final Report on the Tokenization of Financial Assets, IOSCO explores how distributed ledger technology (DLT) is being adopted across capital markets and the implications for regulatory oversight. While tokenization offers potential efficiency gains—such as faster settlement and improved collateral mobility—it also introduces new operational, legal and cyber risks that regulators must consider.

The report highlights the early but growing interest in tokenized instruments and provides a framework for members to assess risks, market integrity and investor protection concerns, aligned with IOSCO’s broader policy recommendations for crypto-asset and DeFi markets.

Read the full article here.

3. Transparency in the Single-Name Credit Default Swaps Market

IOSCO’s Final Report on the Single-Name Credit Default Swaps Market examines lessons from the 2023 banking sector stresses, focusing on market structure, liquidity and transparency. The analysis—developed alongside industry input and regulatory review—finds that the single-name CDS market remains highly illiquid, concentrated among few intermediaries, and currently characterized by limited post-trade transparency.

The report explores potential measures to enhance transparency and evaluates the benefits and potential risks of such reforms. IOSCO will continue monitoring market developments to support greater resilience and stability in global derivatives markets.

Read the full article here.

Cryptocurrency and associated blockchain technology have brought tangible benefits as well as immense risk to the public. This innovation is set to disrupt the banking and payment systems and stock exchanges infrastructure among others with time. However, for investors to have confidence in the digital ecosystem, innovation should satisfy data privacy laws and protect investments and clients, and comply with Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and sanctions regulations. Inadequate regulation breeds corruption, fraud, and this can erode confidence in the whole system.

Digital money is represented on the computer system and on digital ledgers on the blockchain system, while fiat money satisfies the core functions of money.

Our traditional fiat money has the following core functions:

1. Store of Value – Stability in its value and should not be volatile
2. A Unit of Measurement – It provides a common measure to value goods and services
3. A Medium of Exchange – All goods and services can be exchanged with money
4. A Standard of Deferred Payments – It can be borrowed and lent within specified contractual obligations and time

The multi-money environment should be allowed to coexist so as to support and stimulate economic activity by giving individuals and institutions a choice in their transactional payment activities. This flexibility allows businesses to choose the mode of payment which best fits their structure of operations. Some businesses around the world are now accepting Bitcoin and altcoins as a means of payment for their services despite the volatility and risk in their values.

The current payment infrastructure should adapt to meet the needs of the new technology and innovation. A modification of existing legislation or a complete overhaul of the current legislation to better meet the new wave of innovation is urgently required for the public good and to create confidence and uphold the integrity of the financial markets system and to stem digital crime.

New technology and innovation should embed Anti-Money Laundering and Countering the Financing of Terrorism parameters within their blockchain technology to enhance strict adherence to existing and upcoming laws. However, in implementing Anti-Money Laundering laws, data privacy laws should not be infringed upon.

Law-abiding citizens and corporates should not have their rights and business operations curtailed in the name of fighting financial crime; hence, compliance and legal processes should work in harmony to protect them through legal instruments that benefit loyal citizens and corporates.

Smart contracts can be used to filter through client data and flag data not meeting Anti-Money Laundering, Countering the Financing of Terrorism, and sanctions requirements. This can be built into the blockchain system to make sure digital currencies are fully compliant with relevant legislation. This automation will free resources to be deployed to other critical areas. In addition, business processes and operations embedding interoperability in their systems will also save a lot of money and time, as their systems can communicate and share data within the confines of data privacy laws and at speed.

Compliance enforcement can be initiated as transactions occur through automation based on predefined criteria and risk indicators instead of being reactive, as is the case today, since most compliance processes are manual. Law enforcement is limited and delayed, as they only start investigations after the generation of Suspicious Activity Reports (SAR). The processes to bring the culprits to book take time, and the delay often results in massive cost and losses to the investing community.

Blockchain finance should be adapted to meet prevailing regulations to better serve the interests of customers. Smart contracts software can be embedded into the transactions using zero-knowledge proofs (ZKP) to protect business metadata and individual data privacy, unless the transaction fails predefined algorithms; hence, it can be flagged or blocked.

Suggestions

1. Businesses should collaborate to manage costs so that even small upcoming startups can benefit and comply with new forms of compliance at speed.
2. Interoperability – All systems should communicate with each other to better achieve compliance and regulatory regimes, among other benefits.
3. Embedding smart contract software in blockchain to better manage blockchain finance needs a new regulatory architecture and conducive regulatory sandboxes to support new forms of technology and innovation.
4. Education – Massive public awareness and education should be done to communities so that they cannot be misled into committing their financial resources to technology they don’t understand.
5. The financial markets should be structured to make sure that losses are borne by the provider rather than by investors if it’s the provider’s fault.

Conclusion
To better manage new technology and innovation, regulatory sandboxes, interoperability of different systems, automation, continuous public awareness and education, and swift regulation should be part of the process to achieve beneficial outcomes and minimize negative outcomes.

Sources: International Monetary Fund – Financial Stability Board 2023; IMF-FSB Synthesis Paper, Policies for Crypto Assets

By Dominic Indokhomi, Partner and Nathaniel Nduta, Associate, Bowmans Kenya

The Central Bank of Kenya (CBK) has published the revised Risk-Based Credit Pricing Model (RBCPM) for adoption by the banking sector. This follows a public and stakeholder consultation period published by the CBK on 23 April 2025 on the new pricing model.

Under the new model, the lending rate will be comprised of the Kenya Shilling Overnight Interbank Average (KESONIA) plus a premium (“K”), where:

• KESONIA is the overnight interbank average rate charged by banks on unsecured overnight interbank lending and borrowing in Kenyan Shillings; and
• the premium (“K”) reflects a bank’s operating costs, return to shareholders and a borrower’s risk profile.

The new model applies only to variable rate loans denominated in Kenyan Shillings. It does not apply to foreign denominated currency loans and fixed rate loans. In cases where KESONIA is not available, the Central Bank Rate (CBR) may be used as a fallback reference rate.

Banks are required to implement the revised model for new loans effective 1 September 2025, with all existing loans required to be transitioned by 28 February 2026. Banks are required to disclose the full breakdown of their lending rates including the weighted average premium (“K”), fees and charges on their websites as well as on the Total Cost of Credit (TCC) portal.

The Financial Sector Conduct Authority (FSCA) has released communications outlining its stakeholder consultation process on the OMNI-Risk Return (ORR).

The ORR aims to streamline and enhance regulatory reporting by providing a more comprehensive and integrated view of risk across the financial sector. This consultation is an important step toward refining the framework and ensuring that the reporting requirements are effective and proportionate.

SAIFM encourages members, particularly those involved in compliance, risk management, and regulatory reporting, to review the FSCA’s communication for further insight.

Please click here to access the document. 

On 6 August 2025 the Financial Sector Conduct Authority (FSCA) officially introduced ‘Conduct Standard 2 of 2025: Conditions Prescribed in respect of Pension Fund Benefit Administrators’ (Conduct Standard). The Conduct Standard significantly enhances the regulatory framework applicable to benefit administrators of retirement funds governed by the Pension Funds Act, 1956.

The Conduct Standard marks a major upgrade from the previous framework outlined in Board Notice 24 of 2002: ‘Conditions determined in respect of Administrators acting on behalf of Pension Funds’ (Board Notice), which is now being phased out.

The intention is for the Conduct Standard to ultimately replace the Board Notice entirely – giving the Board Notice a much-needed retirement. In ‘Communication 15 of 2025 (RF)’ released with the Conduct Standard, the FSCA advised that it identified the need to strengthen the existing regulatory framework set out in the Board Notice.

Alongside the Conduct Standard, the FSCA has also published ‘FSCA RF Notice 10 of 2025’, which sets out the required format submissions to the FSCA under the Conduct Standard.

While some of the requirements in the Conduct Standard echo those in the Board Notice, it also introduces clearer expectations, tighter controls, and several new requirements. Notably, the Conduct Standard:

• introduces fit and proper requirements for benefit administrators and their key persons;
• requires benefit administrators to establish and maintain an effective ‘complaints management framework’ to ensure the effective resolution of ‘complaints’ (as defined in the Conduct Standard); and
• mandates new requirements for Service Level Agreements between retirement funds and their benefit administrators.
• Most provisions in the Conduct Standard came into effect on 6 August 2025, while others will take effect later. The rollout timeline is in paragraph 40(3) of the Conduct Standard.

Paragraphs 5 to 13 of the Board Notice were repealed as of 6 August 2025, with paragraphs 1 to 4 and 14 scheduled for repeal in in August 2026.

Reforms to the Financial Markets Act and new rules on benchmarks will close gaps and strengthen trust, says FSCA chief Unathi Kamlana.

The Financial Sector Conduct Authority (FSCA) is preparing to overhaul South Africa’s financial markets framework.

The regulator is planning to review the Financial Markets Act (FMA) and a benchmark conduct standard forming the backbone of reforms, Commissioner Umnathi Kamlana (pictured above) said during a keynote address at the South African Institute of Financial Markets Regulatory Summit today.

Kamlana said the FMA review, undertaken in partnership with the National Treasury, reflects how much the market landscape has shifted since the legislation was first introduced.

Please click here to read the full article.

The World Federation of Exchanges (WFE), the global industry association for exchanges and central counterparties (CCPs), has called for enhanced oversight and policy coordination as private investment markets balloon.

Traditionally a complement to public capital markets, private markets have expanded rapidly, aided by policy incentives, raising critical questions about how this unchecked growth could pose significant risks to market integrity, retail investors and potentially even financial stability. In a new paper, Strengthening Private Markets, the WFE calls for improved data and supervisory scrutiny, more global policy focus, and a fairer balance of incentives between public and private markets.

The key risks of unsupervised growth of private markets are identified in the paper:

• Systemic risk: Increased leverage, opaque valuations, and the bundling of private credit with equity introduce complex risks. These need closer scrutiny to avoid destabilising impacts on the wider financial system.
• Risk to retail investors: Disclosures must be strengthened, and risks clearly communicated. High fees and illiquidity pose additional concerns for non-professional investors.
• Unmonitored secondary trading: The emergence of new trading platforms for private assets could affect public market pricing and integrity. There must be supervisory reporting of such trades and potential disclosure to the public.

To meet these challenges, the WFE recommends policy co-ordination that will:

• Develop harmonised transparency standards across public and private markets. 
• Review regulatory and tax treatment regimes, that currently favour private capital.
• Assess the systemic risks associated with the combination of leverage and illiquid secondary trading.
• Promote public listings by ensuring a level playing field and reducing unnecessary burdens.

Nandini Sukumar, CEO of the WFE, said, “Public markets remain the critical infrastructure that underpin capital markets – they are the gold standard, providing liquidity, authoritative pricing, equal access, regulatory oversight and system-wide confidence. Private markets have their place in the ecosystem. However, they need public markets. Ensuring private markets develop without undermining these benefits is the vital policy objective here. As private assets proliferate and begin to target retail investors, policymakers must ensure that transparency, risk management, and investor protection standards keep pace.  Private must evolve within a framework that supports stability, fairness, and long-term economic growth.”

Richard Metcalfe, Head of Regulatory Affairs at the WFE, said, “Transparency, effective oversight, and informed regulation are not constraints – they are prerequisites for sustainable growth. Some national regulators, such as the UK’s FCA, France’s AMF, Singapore’s MAS, and Australia’s ASIC, are starting to look more closely at how to bring more accountability to private markets, and valuable work has been done by the international standard setters at IOSCO, but the rapid growth of private markets means that efforts must be redoubled.” 

Read the full paper here.

The South African Reserve Bank (SARB), through the Market Practitioners Group (MPG), has announced the commencement of the ZARONIA First initiative — a significant step in South Africa’s interest rate benchmark reform journey.

Market participants are urged to prioritise quoting linear derivatives using the South African Rand Overnight Index Average (ZARONIA) over the traditional Johannesburg Interbank Average Rate (Jibar). While Jibar-based screens will remain available for the time being, this transition is considered vital to enhancing the resilience and transparency of South Africa’s financial market infrastructure.

The MPG strongly encourages inter-dealer brokers and broader market participants to begin aligning systems, pricing frameworks, and market conventions to reflect this shift.

Read the full announcement by clicking here.

IOSCO has published its Sustainable Bonds Report on 21 May 2025 which identifies the key characteristics and trends tied to the sustainable bond market.

The sustainable bond market includes green, social, sustainability, and sustainability-linked bonds, and is a rapidly growing market. In 2024, total issuance reached USD 1.1 trillion, which was a 5% increase from 2023. The cumulative amount of sustainable bonds issued stands at more than USD 6 trillion with analysts predicting continued growth in the years to come.

IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility.

These are:

1. Ensure greater clarity in existing or new regulatory frameworks to demonstrate alignment with internationally accepted principles and standards, support consistency, build investor confidence, and support market participation.
2. Establish guiding principles to help provide clarity and consistency when categorizing sustainable bond types.
3. Enhance transparency and disclosure requirements when it comes to reporting on issuers’ progress toward sustainability-related goals – or sustainability performance targets (SPTs) – to promote public accountability.
4. Promote the use of independent and credible external reviewers to mitigate conflict of interest.
5. Utilise capacity building and educational programs to increase awareness and understanding of sustainable bonds among issuers, investors, intermediaries and regulators.

To inform this Report, IOSCO conducted research, surveyed its members and engaged with its Affiliate Members Consultative Committee to gain insight from market participants. It also organized a roundtable with the OECD on sustainable bonds during the 2024 Annual Meeting.

IOSCO Board Chairman Jean-Paul Servais, who also serves as Chair of the Belgium Financial Services & Markets Authority, said: “IOSCO has continued to examine green finance products with IOSCO’s objectives in mind. This Report sets out key considerations for interested jurisdictions when seeking to foster a well-functioning sustainable bond market.”

Dr. Mohamed Farid, Co-Chair of the Green Finance and Innovation Workstream, Vice Chair of IOSCO’s Board, Chair of its Growth and Emerging Markets Committee and Executive Chairman of the Financial Regulatory Authority, Egypt, said: “Our work on Sustainable Bonds subscribes to IOSCO’s investor protection and transparent market objectives. The Report offers a comprehensive view of emerging practices in sustainability bond markets across jurisdictions. It reflects a collective effort to foster transparency, consistency, and innovation in sustainable finance globally.”

Grant Vingoe, Co-Chair of the Green Finance and Innovation Workstream and CEO of the Ontario Securities Commission, said: “Our goal for the Report was to identify the distinctive features of sustainable bonds and outline various approaches used to regulate these products. The research conducted for the Report reflects a broad range of global insights from IOSCO members and market participants on this important emerging trend in the capital markets.”