The South African Institute of Financial Markets (SAIFM) would like to inform its members that the Financial Sector Conduct Authority (FSCA) has published the following regulatory communications on its website. These may be of particular relevance to institutions involved in collective investment schemes and capital markets.
We encourage members to share these updates within their organisations and with relevant industry associations where appropriate:
FSCA Communication 10 of 2025 (CIS) Exemption of money market portfolios of collective investment schemes from the provisions of Chapter 2, Condition 8(4)(b) of Board Notice 90 of 2014 (BN 90). Read more
FSCA CIS Notice 2 of 2025 Exemption granted to managers of money market portfolios from certain requirements of BN 90. Read more
FSCA Communication 9 of 2025 (FM) Support for the “ZARONIA First” initiative and sequencing guidance for linear derivatives. Read more
For further details, visit the FSCA website: www.fsca.co.za
The EU’s framework for systemically important payment systems and central securities depositories/securities settlement systems is complete and consistent with the CPMI-IOSCO Principles for financial market infrastructures (PFMI) in most aspects.
The CPMI-IOSCO assessment identified some areas for improvement where implementation was broadly or partly consistent or not consistent with the PFMI.
The assessment reflects status of implementation as of October 2019. A separate assessment is to be conducted for United Kingdom.
The EU’s implementation of the framework for systemically important payment systems (PSs) and central securities depositories (CSDs) securities settlement systems (SSSs) is consistent with the Principles for financial market infrastructures (PFMI) issued by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO).
Developments in the legal and regulatory framework following the Level 2 assessment date are not in the scope of this report.
The report finds that the implementation of the PFMI is complete and consistent for all Principles for PSs. The legal, regulatory and oversight frameworks in the EU for CSDs/SSSs are complete and consistent with the Principles in most aspects.
However, the assessment identified some areas for improvement, particularly in aspects where implementation was broadly, partly, or not consistent, including risk and governance principles.
Given that there are separate regulatory frameworks for PSs in the euro area and in Sweden, and that these are also separate from the EU-wide regime for CSDs/SSSs, the assessment team has assessed each of these separately.
The United Kingdom was part of the EU before the cut-off date for this review. However, CPMI-IOSCO decided to conduct a separate Level 2 assessment for the UK and therefore the UK’s framework was not evaluated in this report.
Financial institutions have until 1 June 2025 to comply with South Africa’s Joint Standard 2 of 2024: Cybersecurity and Cyber Resilience (Joint Standard), published by the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (Authorities) in May 2024.
“The Joint Standard applies to ‘financial institutions’ as defined in the Joint Standard, such as retirement fund registered under the Pension Funds Act 1956 (PFA),” explains Vanessa Jacklin-Levin, Partner at African law firm Bowmans.
She notes that the purpose of the Joint Standard is to set and enforce a standard for financial institutions to manage and mitigate cybersecurity risks. It sets out minimum requirements and principles for sound practices and processes of cybersecurity and cyber resilience for financial institutions to adopt.
“The Joint Standard requires financial institutions to adopt robust cybersecurity and resilience against cyberattacks and expects financial institutions to implement security controls that are commensurate with their risk appetites based on the nature, complexity, risk profile and size of their financial operations,” Jacklin-Levin explains.
Deirdre Phillips, Partner at Bowmans, explains that financial institutions are required to, among other things, establish a Cybersecurity Strategy and Framework, Cybersecurity Policy, Data Loss Prevention Policy, Cryptographic Key Management Policy, Cyber Incident Management Policy and a Security Access Control Policy.
Phillips notes that “In its recently published Regulatory Strategy for 2025-2028 (available here), the FSCA stated that it remains focused on what matters most, ‘protecting customers and strengthening the integrity and resilience of the financial system’. Cybersecurity and cyber resilience remain among some of the key risks and vulnerabilities in the financial system.”
Jacklin-Levin adds, “The board of trustees of a retirement fund is ultimately responsible for ensuring compliance with the requirements set out in the Joint Standard. Accordingly, where a retirement fund outsources cybersecurity administrative activities to administrators of retirement funds or other service providers, the relevant retirement fund’s board of trustees retains the full responsibility for ensuring compliance with the Joint Standard.”
The World Federation of Exchanges (WFE), the global trade association for exchanges and clearing houses, has published a paper on 25 March 2025 calling for a global, evidence-based refresh of public policy on derivatives. The paper sets out a coherent approach to derivatives in order to nurture their use, especially in regulated, lit environments, to avoid the development of an off-exchange derivatives market that is opaque and less fair to investors.
It is essential that all types of users have access to derivatives to manage economic uncertainty. This means avoiding bureaucracy and blocks on their use, while monitoring all off-exchange and all uncleared derivatives more vigilantly and systematically. The role of exchanges in price discovery and clearing houses in neutralising counterparty risk should be nurtured, as without a thriving public derivatives market, participants will turn to less well-regulated trading venues to manage risk, jeopardising the health of the financial system.
Listed markets constitute the safe, reliable, and verifiable core of derivatives, as they do for other financial instruments, and regulators must ensure they can continue to do so. Public policy should rethink measures that push derivatives trading into under-regulated environments and develop a policy framework that encourages trading on lit public markets to benefit from their numerous public-good aspects.
Nandini Sukumar, CEO of the World Federation of Exchanges,said, “Public markets are the best place to trade derivatives. Any policy being considered that impedes the growth of exchange-traded derivatives misunderstands the vital role they play in managing risk. Fifteen years on from the collapse of Lehman Brothers, it is important not to let markets slip into the bad old ways and, if anything, bring more transactions into the scope of margining and clearing. The real risk is that regulatory, tax or other measures push customers into a less well-regulated place.”
Richard Metcalfe, Head of Regulatory Affairs at the World Federation of Exchanges, said, “Exchange-traded derivatives, with their integral central clearing arrangements, bring clarity as to what the price is and who holds risk positions. They provide the foundation for healthy, well-regulated derivatives markets, which bring huge benefits to savers and businesses, small and large. The balance of regulatory incentives, as between OTC and listed derivatives, should continue to reflect this reality. At the same time, any temptation to load costs onto CCPs, rather than charging the risk-taking market participants, should be resisted to maintain the correct incentives for those risk takers. Measures such as the current EU restrictions on CFDs are a good example of ensuring the highest standards apply across all parts of the derivatives world.”
By Kirsten Kern, Partner and Head of Financial Services Regulatory, and Bright Tibane, Partner, Bowmans
On 3 March 2025, the South African Reserve Bank (SARB) published a draft directive entitled ‘Directive in respect of specific payment activities within the national payment system’ (Draft Directive) simultaneously with a draft exemption notice entitled ‘Designation by the Prudential Authority of specific activities conducted in the national payment system which shall be deemed not to constitute ‘the business of a bank’ under paragraph (cc) in section 1(1) of the Banks Act, 1990’ (Exemption Notice).
While the purpose of the Draft Directive is to prescribe regulatory requirements for conducting prescribed payment activities, the purpose of the Exemption Notice is to exempt the payment activities that technically qualify as ‘the business of a bank’ from the requirements of the Banks Act, 1990 (Banks Act).
The Draft Directive prescribes, inter alia, authorisation, governance, prudential, fitness and propriety, client funds safeguarding, data protection, and reporting requirements for persons (both banks and non-banks) who conduct or seek to conduct any of the following payment activities:
acquiring of payment transaction – contracting with a payee to accept and process payment transactions that result in a transfer of funds to the payee;
card credit payment instruction – a payment instruction resulting in the credit of funds to a payment account linked to a card;
electronic money – electronically stored monetary value issued on receipt of funds and represented by a claim on the issuer, which is generally accepted as a means of payment by persons other than the issuer and is redeemable for physical cash or a deposit into a payment account on demand (including mobile money where an electronic wallet service allows users to store, send and receive money using their mobile phone);
execution of payment transactions – execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or another payment service provider (including execution of debit orders such as once-off direct debits and authenticated collections, execution of payment transactions through a payment card or similar device, and execution of credit transfers such as standing orders);
faster payments – providing an electronic service in which both the transmission of the payment message and the availability of funds to the payee occur in real time or near-real time, on a basis that the service is available 24 hours a day and seven days a week;
issuing of payment instruments – contracting with a payer to provide a payment instrument to initiate payment instructions;
provision of payment account or store of value – providing an account or store of value held in the name of one or more payer or payee which is used for the execution of payment transactions;
provision of third-party payment – payee service provider (accepting funds or the proceeds of payment instructions from multiple payers on behalf of a beneficiary), and payer service provider (accepting funds or the proceeds of payment instructions, from a payer to make payment on behalf of that payer to multiple beneficiaries) (TPPP Payment Activities);
money remittance – a service for the transmission of funds (or any representation of monetary value), with or without any payment accounts being created in the name of the payer or the payee, where (a) funds are received from a payer for the sole purpose of transferring a corresponding amount to a payee or to another payment institution acting on behalf of the payee, or (b) funds are received on behalf of, and made available to, the payee;
clearing – the exchange of payment instructions;
settlement – the discharge of settlement obligations;
provision of a scheme – providing a set of formal, standardised and common binding rules governing the relationship between payment institutions or members of a scheme to provide payment instruments for the transfer of funds, or making and receiving payments, between or by end-users; and
participation in a scheme – Participation in a scheme as admitted by a scheme in terms of its entry and membership criteria.
It is noteworthy that the persons who conduct TPPP Payment Activities will be exempt from several significant requirements of the Draft Directive.
In addition, the Draft Directive prescribes that any person seeking to operate a closed-loop payment system or offer a closed-loop payment activity must be registered with the SARB (although such a person will not be considered as a payment institution and will not be required to comply with most of the requirements of the Draft Directive).
A ‘closed-loop payment system or payment activity’ is a payment system or payment activity that is not interoperable with other payment systems, and the payment service provider is the same entity or part of the same group as the payment service provider of the payee, with transactions limited to a specific network or ecosystem. This will be a significant change as the issuance of closed-loop payment instruments, which are currently unregulated save under the Consumer Protection Act, 2008 (such as gift cards), will become regulated and be subject to registration under the Draft Directive.
On a positive note, the Exemption Notice seeks to exempt the following payment activities that involve the pooling of funds into a store of value or payment account by a person other than a bank for the purpose of conducting payment activities, from the definition of ‘the business of a bank’ as outlined in the Banks Act, subject to the prescribed conditions:
acquiring of payment transactions;
card credit payment instructions;
execution of payment transactions;
electronic money;
faster payments;
issuing of payment instruments;
money remittance; and
provision of payment account or store of value.
The eight payment activities to be exempted under the Exemption Notice are currently considered by the SARB as the business of a bank and can only be offered by a bank or a non-bank in partnership with a bank. The Exemption Notice will enable non-banks that are authorised under the Draft Directive to offer these payment activities.
Both the Draft Directive and the Exemption Notice are in draft form and are available for public comments until 16 April 2025.
The Draft Directive and the Exemption Notice, together with their public comments templates, are available here under the tabs NPS regulation /Consultation. documents’.
The Board of IOSCO congratulates the International Ethics Standards Board for Accountants (IESBA) on achieving an important milestone of finalizing their International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA) and Other Revisions to the Code Relating to Sustainability Assurance and Reporting. IOSCO notes the extensive and thorough outreach program conducted by the IESBA throughout the lifecycle of the development of IESSA.
IOSCO reiterates its support for this work and commends the IESBA for its timely development of the standard in response to the public interest need for ethics (including independence) standards to cover all sustainability assurance providers.
The final standard is responsive to the key considerations and observations set out by IOSCO in its 2023 report and 2024 public statement. IOSCO believes the standard can support high-quality assurance over sustainability-related information and may enhance consistency, comparability and reliability of sustainability-related information provided to the market. The final standard together with the IESBA’s plan to develop implementation support materials and other capacity-building efforts, can contribute to enhancing trust in the sustainability-related information provided to investors.
Recognizing that individual jurisdictions have different domestic arrangements regarding the consideration of international ethics and independence standards, IOSCO calls on members to consider ways in which they might apply or otherwise be informed by the IESSA when considering ethics and independence requirements for assurance or permissions within the context of their jurisdictional arrangements.
Jean-Paul Servais, Chair of IOSCO, said: “History has shown us that assurance is necessary to deliver trust in disclosures, which is instrumental for the good functioning of financial markets. Today’s announcement from IESBA is a welcome development, providing a robust ethical framework for the assurance of sustainability reporting.
A strong assurance framework for sustainability related disclosures needs to be focused on the public interest and should be profession – and framework – agnostic. IESBA’s new international standard will foster trust and integrity for years to come.
“IOSCO will continue to play a key role in promoting global consistency in the assurance of sustainability-related information”, he added.
Please click here to read IOSCO’s full Statement of Support.
The Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published Final Reports on initial and variation margin in centrally cleared and non-centrally cleared markets.
The Reports address areas of further policy work identified in the 2022 BCBS-CPMI-IOSCO Review of margining practices as part of the policy responses coordinated by the Financial Stability Board (FSB) to the March 2020 “dash for cash” market turmoil.
The Reports contain proposals and practices intended to improve transparency, streamline margin processes and increase the predictability of margin requirements across centrally and non-centrally cleared markets.
The BCBS, the CPMI and IOSCO on 15 January 2025 published three Reports containing proposals and practices to improve transparency and streamline margin processes and increase the predictability of margin requirements across centrally and non-centrally cleared markets.
The Reports are part of a holistic work program bringing together the BCBS, the CPMI, IOSCO and the FSB. They were developed following the 2022 publication of the BCBS-CPMI-IOSCO report Review of margining practices, which identified areas for further work.
The proposals seek to aid market participants’ and regulators’ understanding of initial margin requirements and responsiveness through increased transparency. An accompanying cover note summarises consultation feedback. The relevant standard setting bodies will consider how best to implement the proposals.
In tandem, the CPMI and IOSCO have published the Final Report Streamlining Variation Margin in Centrally Cleared Markets – Examples of Effective Practices. The eight effective practices set out in the Report provide examples of how standards set out in the CPMI-IOSCO Principles for financial market infrastructures, as supplemented by the relevant guidance, can be met.
The practices aim to enhance market participants’ liquidity preparedness for above-average variation margin calls through increased transparency and the efficient collection and distribution of variation margin in centrally cleared markets.
These Reports should be read together as elements of a comprehensive approach to improving transparency, streamlining margin processes, increasing the predictability of margin requirements and improving the liquidity preparedness of non-bank market participants for margin calls.
The above link details the inadequacies of risk management compliance programs in meeting Financial Intelligence Centre Act (FIC) regulations by Old Mutual Life Assurance Business.
The company incurred administrative sanctions and financial penalties to the detriment of its reputation and social standing in the eyes of the public, institutional investors, and partners.
The damage can also negatively impact the company’s bottom line, as some institutional investors and international partners may withdraw their investments and funding.
This is necessitated by mandates that clearly state some investors cannot continue associating themselves with companies failing to comply with regulations, as this will also damage their brand reputation.
It is vital to ensure that the balance sheet is well diversified to withstand the risk of withdrawal of funding and investments by major partners due to unforeseen risks. The makeup of the balance sheet should be structured in such a way that no major investor or funder holds more than fifty percent, as any crisis involving the major investor could collapse the business.
This would create a liquidity crisis, as replacing the outgoing investor would be costly and difficult. The company’s position in the eyes of lenders in the market would be negatively affected, and any lending would come at a hefty premium.
However, we expect the company to regularize its position and meet all compliance requirements, as it has the means and resources to absorb the risk.
Some clients need to be reassured that their money is always safe despite these minor weaknesses in control. Serious and positive engagement with the client base is of paramount importance to temper rumors.
Customers’ funds are segregated from business funds, and customers should always be made aware of this, either in contractual agreements, social media interactions, or advertisements.
An explanation to shareholders regarding these incidents will help maintain positive, sustainable, long-term relationships. A clear solution and source of payment for these penalties should be communicated.
This will also demonstrate the resilience of the company’s contingency plans and its risk management capabilities, as in some cases, these funds might come from insurance or other sources such as savings.
How to Manage the Operational Incident Going Forward
The company should revisit the source of the incident and apply corrective measures promptly to prevent recurrence.
A thorough assessment of its risk management framework, personnel, and oversight should be conducted to understand how controls failed to proactively manage the risk.
Operational risk management will assist in identifying grey areas.
Employing skilled and experienced professionals in compliance management will aid the business in managing compliance risks effectively.
The evolving and dynamic nature of compliance regulations calls for interdepartmental meetings and engagements.
Regulatory and compliance costs are increasing companies’ operational expenses; therefore, it is essential to find the best ways to manage overall business costs.
South Africa’s OTC derivatives regulatory landscape is maturing, with key updates impacting both domestic and international market participants. These developments are part of South Africa’s implementation of global financial reforms aligned with the G20’s commitment to improving transparency and reducing systemic risk in the OTC derivatives market.
Some of the most important recent and upcoming changes to be aware of are as follows.
Strate granted trade data repository licence in December 2024
In a major step forward for South Africa’s financial market infrastructure, in December 2024 the Financial Sector Conduct Authority (FSCA) granted to Strate (Pty) Ltd, South Africa’s main central securities depository, a licence to operate as a Trade Data Repository (TDR).
As a TDR, Strate will be tasked with collecting, storing, and providing access to OTC derivatives trade data. Although the FSCA published a conduct standard outlining trade data reporting obligations in 2018, its commencement date has yet to be determined by the Prudential Authority (PA) of the South African Reserve Bank.
Now, with a licensed TDR in South Africa, market participants will be waiting to hear about the commencement date and will be eager to learn whether the reporting fields set out in the annexure to the conduct standard will be adjusted in line with the evolution of trade data reporting in other jurisdictions.
It is worth noting that with Joint Notice 2 of 2024, also released in December 2024, the PA announced it will require OTC derivative providers and financial institution counterparties to report certain margin information via its Umoja portal with effect from 1 April 2025, in line with the 2023 amendments to Joint Standard 1 of 2020 ‘Margin Requirements for Non-Centrally Cleared Over-The-Counter Derivative Transactions’. Trade data reporting to Strate will be in addition to reporting on the Umoja portal, so market participants will be looking to see some alignment in the two reporting streams.
Initial margin requirements – next phase-in September 2025
Another significant milestone on the horizon is the final phase of implementation of initial margin (IM) requirements for non-centrally cleared derivatives, scheduled for September 2025. This final phase will impose IM requirements on providers trading with counterparties, where both belong to groups that meet a threshold of the month-end average gross notional amount of OTC derivatives for March, April and May 2025 exceeding ZAR 100 billion. The phase will significantly expand the pool of institutions required to exchange IM, and the market is accordingly working to deadline.
General Laws Amendment Bill published in December 2024
On a related regulatory note, the South African General Laws Amendment Bill, introduced in December 2024, proposes a change to the recently implemented chapter 16 of the Financial Sector Regulation Act, 2017 (Resolution Framework) applicable to banks and certain other designated institutions.
In 2023, together with the announcement of the effective date of certain sections of the Resolution Framework, the PA released an Interpretation Note stating that it did not view section 166S (containing the write-down and cancellation powers of the Resolution Authority) as applying to master agreements as defined in section 35B of the Insolvency Act, 1936 (including ISDA Master Agreements, GMSLAs and GMRAs).
South African OTC derivative and securities finance market participants had expected an analogous amendment to the Resolution Framework to come through the long-awaited Conduct of Financial Institutions Bill (CoFI), but the amendment has instead appeared in the National Treasury’s General Laws Amendment Bill released in December 2024.
The National Treasury Media Statement regarding the Bill, together with a link to the Bill and commenting instructions can be found here. Comments are due to National Treasury by close of business on 6 February 2025.
Conclusion
The South African derivatives regulatory environment continues to mature, with necessary enactments and changes occurring regularly. We expect to see increased activity relating to trade data reporting and margin in the coming year.
Proposals to prioritize ZARONIA in the South African derivatives market to promote market stability and transparency. For more details, visit the SARB website.
