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Authors Howard Chitimira and Sharon Munedzi
Affiliation North-West University, South Africa
Email Howard.Chitimira@nwu.ac.za and sharonmunedzi@gmail.com
Date Submitted 14 November 2023
Date Revised 30 April 2024
Date Accepted 30 April 2024
Date Published 26 August 2024
Editor Prof W Erlank
Journal Editor Prof W Erlank
How to cite this contribution
Chitimira H and Munedzi S "An Overview of the Role and Functions of Selected Financial Role Players to Protect Financial Stability and Promote Market Integrity in South Africa" PER / PELJ 2024(27) - DOI http://dx.doi.org/10.17159/1727-3781/2024/v27i0a17255
Copyright
DOI http://dx.doi.org/10.17159/1727-3781/2024/v27i0a17255
Abstract
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The South African Reserve Bank (SARB) and other financial role |
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Keywords
Financial stability; market integrity; roles and functions; FSR Act.
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1 Introductory remarks
Cooperation and collaboration between the South African Reserve Bank (SARB) and other financial role players such as the Prudential Authority (PA), the Financial Sector Conduct Authority (FSCA), the National Credit Regulator (NCR), the Financial Intelligence Centre (FIC), the Financial Stability Oversight Committee (FSOC), the Financial Sector Contingency Forum (FSCF), the Financial Sector Council of Regulators (FSCR), the Financial Sector Inter-Ministerial Council (FSIC) and relevant Cabinet Ministers is essential for the promotion, protection, enhancement and maintenance of financial stability and market integrity in South Africa.
1
Howard Chitimira. LLB (cum laude), LLM (UFH), LLD (NMMU). Research Professor and Professor of Securities and Financial Markets Law, Faculty of Law, North-West University, South Africa. E-mail: Howard.Chitimira@nwu.ac.za. ORCiD: https://orcid.org/0000-0003-1881-1242. Sharon Munedzi. LLB, LLM, LLD (NWU). Postdoctoral Research Fellow, Faculty of Law, North-West University, South Africa. E-mail: sharonmunedzi@gmail.com. ORCiD: https://orcid.org/0000-0003-4326-3698. This article was influenced in part by Munedzi’s Doctor of Laws (LLD) thesis entitled A comparative statutory analysis of the collaboration and cooperation between the South African Reserve Bank and other financial regulatory bodies under the Financial Sector Regulation Act 9 of 2017 (LLD dissertation, 2022) 69-95. The article was initially presented at the 1st Banking, Competition and Corporate Law Colloquium at North-West University, Faculty of Law, on 6-7 July 2023. 1 Van Niekerk and Van Heerden 2020 SALJ 113; Llewellyn "Institutional Structure of Financial Regulation" 28; Godwin and Schmulow 2015 SALJ 758; Schmulow 2017 AJICL 394. 2 Llewellyn "Institutional Structure of Financial Regulation" 28; see related comments by Chitimira 2014 Speculum Juris 110; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 8; Godwin and Schmulow 2015 SALJ 758. 3 Financial Sector Regulation Act 9 of 2017 (FSR Act), see ss 26 and 76; Godwin and Schmulow 2015 SALJ 758; Qumba 2022 SALJ 92; Godwin 2017 LFMR 183; Schmulow 2017 AJICL 395. 4 See ss 20(1), 27, 77, 79(2) and 83(1) of the FSR Act; Godwin and Schmulow 2015 SALJ 759; Van Niekerk and Van Heerden 2020 SALJ 118; Godwin 2017 LFMR 151, 152; see related comments by Godwin, Li and Ramsay 2016 HKLJ 938.
each role player. This approach will ensure effective cooperation and collaboration between the SARB and other financial role players.
5
5 Godwin 2017 LFMR 184; Godwin and Schmulow 2015 SALJ 759; Schmulow 2017 AJICL 396; Godwin, Li and Ramsay 2016 HKLJ 630. 6 Sections 26 and 76 of the FSR Act; Van Heerden and Van Niekerk 2017 THRHR 643; Godwin, Howse and Ramsay 2017 SALJ 667; Van Heerden and Van Niekerk 2018 LFMR 156.
2 The role and functions of the SARB to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
Financial stability occurs when a financial sector inspires general confidence through its resilience to systemic risks and its ability to efficiently offer financial services, its ability to offer financial products, and its ability to perform its roles and functions without interruption.
7
7 Section 4 of the FSR Act; see related comments by Van Heerden and Van Niekerk 2017 THRHR 643; Van Heerden and Van Niekerk 2018 LFMR 156; Schinasi 2004 https://www.imf.org/external/pubs/ft/wp/2004/wp04187.pdf 4. 8 Austin 2017 Wm & Mary Bus L Rev 219; Schwartz, Byrne and Stempel Market Integrity 14; Fodor 2008 JFC 262. 9 Section 12 of the FSR Act; Constitution of the Republic of South Africa, 1996 (the Constitution) s 255; Van Heerden and Van Niekerk 2018 LFMR 156; De Jager 2013 SA Merc LJ 496. 10 Section 12 of the FSR Act; s 255 of the Constitution; Van Heerden and Van Niekerk 2017 THRHR 643; Van Heerden and Van Niekerk 2018 LFMR 156. 11 See s 76 of the FSR Act; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 13; Van Heerden and Van Niekerk 2018 LFMR 156.
The FSR Act provides that the SARB is primarily mandated to protect and promote financial stability.
12
12 Section 11 of the FSR Act; s 3 of the Reserve Bank Act 90 of 1989; National Treasury 2011 https://www.treasury.gov.za/twinpeaks/20131211%20-%20item%202%20a% 20safer%20financial%20sector%20to%20serve%20south%20africa%20better.pdf; Schmulow 2017 AJICL 394; De Jager 2013 SA Merc LJ 499. 13 Section 12 of the FSR Act; see related comments by Osode 2021 IJEBL 12; Godwin, Kourabas and Ramsay 2016 Int'l Law 275; also see Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 13. 14 Sections 12, 15, 20 and 26 of the FSR Act; Van Heerden and Van Niekerk 2018 LFMR 157; see related comments by Allen 2014 Geo J Int'l L 934; also see Taylor 2009 Connecticut Insurance Law Journal 66. 15 Section 26 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 115; Godwin and Schmulow 2015 SALJ 759; Schmulow 2017 AJICL 396; Qumba 2022 SALJ 95.
The FSR Act establishes two bodies, namely, the Financial Stability Oversight Committee (FSOC) and the Financial Sector Contingency Forum (FSCF) to facilitate the SARB's financial stability objective.
16
16 Sections 20 and 25 of the FSR Act; SARB 2016 https://www.resbank.co.za/ content/dam/sarb/what-we-do/financial-stability/A%20new%20macroprudential%20 policy%20framework%20for%20South%20Africa.pdf; Van Heerden and Van Niekerk 2018 LFMR 156; Godwin, Howse and Ramsay 2017 SALJ 665. 17 Section 11(2)(a) of the FSR Act; Van Heerden and Van Niekerk 2018 LFMR 157; see related comments by Van Niekerk and Van Heerden 2020 SALJ 116; also see De Jager 2013 SA Merc LJ 497.
The FSR Act provides that the SARB should take into consideration the views and information shared by other financial regulators when fulfilling its financial stability mandate.
18
18 Section 26(2) of the FSR Act; see related comments by Allen 2014 Geo J Int'l L 935; Godwin and Schmulow 2015 SALJ 766; Van Heerden and Van Niekerk 2018 LFMR 158. 19 Section 27(1) of the FSR Act; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; also see Schwarcz 2008 Georgetown Law Journal 194; SARB 2016 https://www.resbank.co.za/content/dam/sarb/what-we-do/financial-stability/A%20new%20macroprudential%20policy%20framework%20for%20South%20Africa.pdf 31.
The SARB is required to enter into a MOU to establish cooperation, collaboration and information sharing arrangements with other financial role players to effectively promote financial stability.
20
20 Section 27(1) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 119; Godwin 2017 LFMR 184; Schmulow 2017 AJICL 401. 21 Section 21 of the Financial Intelligence Centre Act 38 of 2001 (FICA); see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Van Niekerk and Van Heerden 2020 SALJ 108-114; Sharrock Law of Banking and Payment 41. 22 PA date unknown https://www.resbank.co.za/content/dam/sarb/what-we-do/prudential-regulation/PA%20Regulatory%20and%20Supervisory%20 Strategy%202021.pdf; see related comments by Chitimira Market Abuse Regulation 178.
As noted earlier, the SARB does not have an express mandate to promote, protect, enhance and maintain market integrity in South Africa. However, the SARB may use its statutory powers and authority as the central bank to promote market integrity by monitoring risks that may weaken the financial
sector.
23
23 Section 11(2)(a) of the FSR Act; Van Heerden and Van Niekerk 2018 LFMR 157; see related comments by Van Niekerk and Van Heerden 2020 SALJ 116; also see De Jager 2013 SA Merc LJ 497. 24 Sections 12, 26 and 76 of the FSR Act; see related comments by Chitimira and Magau 2022 EIRP Proceedings 360; also see Sharrock Law of Banking and Payment 41; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Van Niekerk and Van Heerden 2020 SALJ 115. 25 PA date unknown https://www.resbank.co.za/content/dam/sarb/what-we-do/prudential-regulation/PA%20Regulatory%20and%20Supervisory%20 Strategy%202021.pdf 27. 26 Section 11(2)(b) of the FSR Act; s 103 of the National Credit Act 34 of 2005 (NCA); Van Heerden and Van Niekerk 2018 LFMR 157; see related comments by Goodspeed 2017 SA Financial Regulation Journal 15.
3 The role and functions of the PA to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The FSR Act also established the PA
27
27 Section 32 of the FSR Act; Goodspeed 2017 SA Financial Regulation Journal 15; Van Heerden and Van Niekerk 2018 LFMR 159; Godwin 2017 LFMR 185. 28 Section 32 of the FSR Act; Chitimira and Magau 2022 EIRP Proceedings 366; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Van Niekerk and Van Heerden 2020 SALJ 118. 29 Section 33 of the FSR Act; see related comments by Van Heerden and Van Niekerk 2017 THRHR 642; Van Heerden and Van Niekerk 2018 LFMR 159.
safety and soundness of market infrastructures to maintain market integrity in South Africa.
30
30 Section 33(b) of the FSR Act; see related comments by Godwin 2017 LFMR 185; Godwin, Howse and Ramsay 2017 SALJ 670; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12.
The PA is required to assist, share information, cooperate and collaborate with the SARB, the FSCA, the NCR, the FIC, the Competition Commission and other relevant financial role players to promote financial stability and enhance market integrity.
31
31 Sections 34(1)(a)-(b) and 26 of the FSR Act; Chitimira and Magau 2022 EIRP Proceedings 366; Van Niekerk and Van Heerden 2020 SALJ 118; Visagie-Swart and Lawack 2020 SA Merc LJ 148. 32 Section 34(1)(d) of the FSR Act; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Chitimira and Magau 2022 EIRP Proceedings 366.
Furthermore, the PA is required to cooperate and collaborate with the FSCA in accordance with the FSR Act.
33
33 Section 57(a)-(b)(i) of the FSR Act; Chitimira Market Abuse Regulation 41; see related comments by Van Niekerk and Van Heerden 2020 SALJ 119; also see Osode 2021 IJEBL 13; Visagie-Swart and Lawack 2020 SA Merc LJ 132.
The FSR Act imposes an obligation on the PA to promote and enhance sustainable competition in the financial sector.
34
34 Section 34(1)(d) of the FSR Act; Osode 2021 IJEBL 14. 35 Osode 2021 IJEBL 14; Godwin, Howse and Ramsay 2016 JBR 106; Godwin, Kourabas and Ramsay 2016 Int'l Law 283; Jensen and Kingston 2010 JIBFL 549. 36 Qumba 2022 SALJ 105; Godwin and Ramsay 2015 CIFR Paper 252; Godwin, Li and Ramsay 2016 HKLJ 628; Jensen and Kingston 2010 JIBFL 556. 37 Section 34(1)(d) of the FSR Act; Osode 2021 IJEBL 14; see related comments by Goodspeed 2017 SA Financial Regulation Journal 16; also see Manguzvane and Muteba Mwamba 2019 International Review of Applied Economics 632.
However, the FSR Act does not expressly provide for such cooperation and collaboration.
38
38 Section 34(1)(d) of the FSR Act. 39 Osode 2021 IJEBL 14; see related comments by Botha and Makina 2011 IBERJ 30; Godwin and Schmulow 2015 SALJ 760; Schmulow 2011 AJICL 401.
The PA should further promote financial stability in South Africa. The FSR Act provides that the PA should assist in maintaining financial stability and participate in the mitigation of risks that affect financial stability by enforcing any measures that are recommended by the SARB from time to time.
40
40 Section 34(1)(f) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 642; Van Heerden and Van Niekerk 2018 LFMR 159; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Chitimira and Magau 2022 EIRP Proceedings 366. 41 PA date unknown https://www.resbank.co.za/content/dam/sarb/what-we-do/prudential-regulation/PA%20Regulatory%20and%20Supervisory%20Strategy%202021.pdf 29; Visagie-Swart and Lawack 2020 SA Merc LJ 132. 42 PA date unknown https://www.resbank.co.za/content/dam/sarb/what-we-do/prudential-regulation/PA%20Regulatory%20and%20Supervisory%20 Strategy%202021.pdf 29; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 14; Chitimira and Magau 2022 EIRP Proceedings 367. 43 PA date unknown https://www.resbank.co.za/content/dam/sarb/what-we-do/prudential-regulation/PA%20Regulatory%20and%20Supervisory%20 Strategy%202021.pdf 28; see related comments by Osode 2021 IJEBL 23; also see Susskind and Vines 2020 Oxford Review of Economic Policy Journal 1, 6. 44 Sections 33(d) and 34(b) of the FSR Act; see related comments by Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 642; Van Heerden and Van Niekerk 2018 LFMR 159; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Chitimira and Magau 2022 EIRP Proceedings 366.
fulfil its objectives.
45
45 Section 34 of the FSR Act; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Chitimira and Magau 2022 EIRP Proceedings 366; see related comments by Van Niekerk and Van Heerden 2020 SALJ 121. 46 Section 34(3) of the FSR Act; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 12; Chitimira and Magau 2022 EIRP Proceedings 366.
4 The role and functions of the FSCA to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The FSCA is an independent market conduct regulator in South Africa.
47
47 Section 56 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 115; Godwin and Schmulow 2015 SALJ 759; Schmulow 2017 AJICL 398; Govender 2019 Without Prejudice 6. 48 See ss 57 and 58 of the FSR Act; Osode 2021 IJEBL 18; Qumba 2022 SALJ 99; Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 636. 49 Section 57(a)-(b) of the FSR Act; Chitimira Market Abuse Regulation 41; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 9; Chitimira and Magau 2022 EIRP Proceedings 366. 50 Section 57(c) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 119; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 9; Chitimira and Magau 2022 EIRP Proceedings 366.
The FSCA plays a significant role as the enforcement authority of anti-market abuse laws to protect and enhance the integrity of South African financial markets.
51
51 Sections 32-34 and 167-174 of the FSR Act; Chitimira Market Abuse Regulation 41; Van Wyk 2019 THRHR 395; Schmulow 2017 Law and Financial Markets Review 165.
promote financial stability and market integrity in South Africa.
52
52 See related comments by Chitimira and Lawack 2013 Obiter 212; Chitimira and Lawack 2012 Obiter 552; Chitimira Market Abuse Regulation 160. 53 Chitimira Market Abuse Regulation 45; see related comments by Luiz 2011 SA Merc LJ 163; Osode 1999 AJICL 705; Chitimira 2014 Mediterranean Journal of Social Sciences 245. 54 See related comments by Luiz 2011 SA Merc LJ 162; also see Chitimira 2019 IJEBL 110; Schmulow 2017 Law and Financial Markets Review 168.
The FSR Act also requires the FSCA to participate in relevant international bodies, and cooperate and/or collaborate with its international counterparts so as to achieve its objectives.
55
55 Section 58(4) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 120; Qumba 2022 SALJ 101; see related comments by Osode 2021 IJEBL 18. 56 Schmulow 2017 AJICL 395; Basel Committee on Banking Supervision 2012 https://www.bis.org/publ/bcbs230.pdf principle 3; see related comments by Keenan 2006 Norton Journal of Bankruptcy Law and Practice 135; Bordo and Schwartz 1999 JIMF 686. 57 Chitimira Market Abuse Regulation 46; Chitimira and Lawack 2012 Obiter 552; see related comments by Chitimira 2019 IJEBL 110; Schmulow 2017 Law and Financial Markets Review 168. 58 Marcacci 2012 Richmond Journal of Global Law and Business 24; IOSCO 2002 https://www.iosco.org/library/pubdocs/pdf/IOSCOPD386.pdf; IOSCO Board 2019 https://www.bis.org/cpmi/publ/d189.pdf..
and investigate financial crime and market misconduct in South Africa.
59
59 Marcacci 2012 Richmond Journal of Global Law and Business 26; Malaysia Securities Commission 2015 https://www.sc.com.my/development/international/ cross-border-co-operation/list-of-iosco-multilateral-mou-signatories; see related comments by Chitimira and Lawack 2013 Obiter 208.
The FSCA has regulatory powers to request information from other regulatory bodies
60
60 Section 58 of the FSR Act; see related comments by Qumba 2022 SALJ 104; Chitimira Market Abuse Regulation 42. 61 Sections 134-139 of the FSR Act; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 10; Sithole 2018 Financial Sector Conduct Authority 22. 62 Section 106(2)(a)-(e) of the FSR Act; Viljoen, Lallo and Bunge "Financial Sector Regulation Act: Implementing Twin Peaks and the Impact on the Industry" 8; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 10; Schmulow 2017 Law and Financial Markets Review 169. 63 Section 144(1) and (4) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; see related comments by Godwin and Schmulow 2015 SALJ 761; Van Wyk 2019 THRHR 396. 64 Section 144(4) of the FSR Act; Van Heerden and Van Niekerk 2017 THRHR 647; Van Niekerk and Van Heerden 2020 SALJ 119; Van Wyk 2019 THRHR 395; Schmulow 2017 LFMR 169.
financial stability objectives, information exchange and the monitoring of financial stability risks.
65
65 SARB and FSCA 2022 https://www.fsca.co.za/Regulatory%20Liaison/ MOU_FSCA%20and%20SARB.pdf; see related comments by Van Niekerk and Van Heerden 2020 SALJ 119; also see Qumba 2022 SALJ 102.
Although the FSCA is an independent juristic person, it does not perform its role and functions in isolation. The emphasis on cooperation and collaboration when fulfilling its regulatory duties under the FSR Act ensures that the FSCA constantly consults, assists and discusses matters relating to common interests with other financial role players such as the SARB, the FIC, the PA and the NCR. The FSR Act also obliges other financial role players such as the PA to cooperate, collaborate and assist the FSCA in fulfilling its functions and objectives.
66
66 Section 34(1)(b) of the FSR Act; Osode 2021 IJEBL 18; Qumba 2022 SALJ 99; Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 636. 67 See related comments by Chitimira Market Abuse Regulation 44; Chitimira and Lawack 2013 Obiter 212; Chitimira and Lawack 2012 Obiter 552; Luiz 2011 SA Merc LJ 163.
5 The role and functions of the FSOC to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The FSOC is a committee established by the FSR Act to deal with all matters relating to financial stability.
68
68 Section 20 of the FSR Act; see related comments by Godwin and Schmulow 2015 SALJ 765; Qumba 2022 SALJ 112; also see Van Heerden and Van Niekerk 2018 LFMR 157.
stability.
69
69 Section 20(2)(b) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 117; Godwin 2017 LFMR 187; Van Heerden and Van Niekerk 2018 LFMR 158. 70 See s 21 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 117; see related comments by Hollander and Van Lill 2019 https://ideas.repec.org/p /sza/wpaper/wpapers325.html 12; also see Godwin, Howse and Ramsay 2017 SALJ 670. 71 Section 21(c) of the FSR Act; see related comments by Schmulow 2015 CIFR Paper Series 9; Goodspeed 2017 SA Financial Regulation Journal 18; Van Heerden and Van Niekerk 2018 LFMR 158.
The FSOC serves as a forum for discussion between the SARB and other financial role players in all matters relating to financial stability. Essentially, the FSOC fosters cooperation and collaboration between the SARB and other financial role players such as the PA, the FSCA, the FIC and the NCR to promote and to enhance financial stability by creating a platform for discussions and information sharing.
72
72 Van Heerden and Van Niekerk 2018 LFMR 158; Van Heerden and Van Niekerk 2017 THRHR 645; see related comments by Qumba 2022 SALJ 96; also see Godwin, Li and Ramsay 2016 HKLJ 635. 73 Section 21(c)(i)-(ii) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 117; see related comments by Qumba 2022 SALJ 96; Schmulow 2017 AJICL 398; also see Osode 2021 IJEBL 18. 74 Godwin, Li and Ramsay 2016 HKLJ 630; Llewellyn "Institutional Structure of Financial Regulation" 28; Godwin, Howse and Ramsay 2017 SALJ 701; Godwin and Schmulow 2015 SALJ 758.
The FSOC comprises of senior officials of other financial role players such as the SARB, the PA, the FSCA, the FIC and the NCR. In this regard, it is submitted that the membership of the FSOC fosters high-level coordination through information sharing, consultation and discussions on matters of common interest between the SARB and the key financial role players in South Africa.
75
75 See related comments by Schmulow 2017 AJICL 398; also see Osode 2021 IJEBL 18; Godwin and Schmulow 2015 SALJ 761.
the designation of systemically important financial institutions; advising the relevant Minister and the SARB on mechanisms regarding the promotion, protection, prevention of risks, crisis management and prevention; recommending mechanisms to protect, promote, maintain and enhance financial stability to relevant state organs; management or prevention of risks to financial stability; and performing any other relevant functions imposed by financial sector laws.
76
76 Section 21 of the FSR Act; see related comments by Godwin, Howse and Ramsay 2017 SALJ 681; Van Heerden and Van Niekerk 2017 THRHR 652; see related comments by Chitimira 2020 Acta Universitatis Danubius Juridica 280. 77 Section 24 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; see related comments by Godwin and Schmulow 2015 SALJ 761.
Having regard to the role and functions of the FSOC, it is submitted that the FSOC was established to create a platform for the SARB and other financial role players to make decisions relating to the SARB's financial stability mandate. It is a platform that enables the financial role players to cooperate and collaborate to protect and maintain financial stability through regular meetings, consultations and discussions. However, we submit that the role and functions of the FSOC are limited to facilitating cooperation and collaboration and do not extend to the enforcement of regulatory coordination in South Africa. As such, there remains a gap in relation to the enforcement to ensure consistency in inter-agency coordination to promote, protect, enhance and maintain financial stability and market integrity in South Africa.
6 The role and functions of the FSCF to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The FSCF was established under the FSR Act to assist the FSOC with the discovery of potential systemic risk events so that appropriate measures to mitigate such risks can be adopted.
78
78 Section 25(2) of the FSR Act; Schmulow 2017 AJICL 395; Godwin, Howse and Ramsay 2017 SALJ 670; Godwin, Kourabas and Ramsay 2016 Int'l Law 279.
systemic risks. It has a duty to assist the FSOC to fulfil its objectives by fostering cooperation and collaboration between its member institutions.
79
79 See related comments by Chitimira 2020 Acta Universitatis Danubius Juridica 280; Godwin, Howse and Ramsay 2017 SALJ 681; Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 652. 80 Section 25(1) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; see related comments by Schmulow 2017 AJICL 398; also see Osode 2021 IJEBL 18; Godwin and Schmulow 2015 SALJ 761.
The FSCF receives administrative support from the SARB to fulfil its functions effectively.
81
81 Section 25(6) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; Van Heerden and Van Niekerk 2017 THRHR 652; see related discussion by Chitimira 2020 Acta Universitatis Danubius Juridica 280; Godwin, Howse and Ramsay 2017 SALJ 681. 82 Section 25(2) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; see related comments by Godwin, Howse and Ramsay 2017 SALJ 681; Godwin 2017 LFMR 152. 83 See related comments by Van Heerden, Van Niekerk and Huls 2020 THRHR 510; Van Niekerk and Van Heerden 2020 SALJ 118.
7 The role and functions of the FSCR to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The FSR Act established the FSCR to facilitate cooperation, collaboration and consistency of action between the SARB and member institutions of the FSCR, namely, the Department of Trade and Industry, the Department of Health, the NCR, the FIC, the Medical Schemes, the National Consumer Commission and the Competition Commission.
84
84 Section 79 of the FSR Act. 85 Section 79(2) of the FSR Act; Godwin and Schmulow 2015 SALJ 768; Van Niekerk and Van Heerden 2020 SALJ 123; Van Heerden, Van Niekerk and Huls 2020 THRHR 501. 86 Section 79(2) of the FSR Act; Godwin and Schmulow 2015 SALJ 768; Van Niekerk and Van Heerden 2020 SALJ 123; Qumba 2022 SALJ 96; Osode 2021 IJEBL 20. 87 Schmulow 2017 AJICL 401; Godwin, Howse and Ramsay 2017 SALJ 665; see related comments by Godwin, Kourabas and Ramsay 2016 Int'l Law 282. 88 Section 79(3) of the FSR Act; Godwin and Schmulow 2015 SALJ 761; see related comments by Godwin, Li and Ramsay 2016 HKLJ 635; Godwin 2017 LFMR 187.
The FSCR does not have other substantive powers and functions that go beyond its facilitating and coordinating role. The authors submit that this approach might have been implemented as a measure to prevent the roles and functions of the FSCR from cutting across the objectives and functions
of its member institutions.
89
89 Section 79(4) of the FSR Act; see related comments by Kourabas "Trends and Theory in Financial Regulation" 35; Kourabas 2018 JBFLP 187; Godwin and Schmulow 2015 SALJ 762. 90 Section 79(2) of the FSR Act; Kourabas 2018 JBFLP 187; Godwin, Li and Ramsay 2016 HKLJ 635; also see Godwin 2017 LFMR 185.
The FSCR is a forum for discussing and resolving matters that could threaten financial stability and market integrity.
91
91 Section 79 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; Schmulow 2017 AJICL 401; Godwin, Howse and Ramsay 2017 SALJ 665. 92 Section 80(1) of the FSR Act; Godwin and Schmulow 2015 SALJ 768; Van Niekerk and Van Heerden 2020 SALJ 118; see related comments by Kourabas 2018 JBFLP 188. 93 Hanrahan 2019 LFMR 127; Schmulow, Fairweather and Tarrant 2018 Law and Financial Markets Review 195; Godwin and Ramsay 2015 CIFR Paper 251; Jensen and Kingston 2010 JIBFL 549.
The FSCR should not be regarded as the only forum for inter-agency coordination between financial sector role players. This means that its powers and functions should not limit the powers and functions of its member institutions in relation to cooperation and collaboration with each other.
94
94 See related comments by Godwin and Schmulow 2015 SALJ 767; Kourabas 2018 JBFLP 188; Godwin, Li and Ramsay 2016 HKLJ 638.
8 The role and functions of the FIC in promoting, protecting, enhancing and maintaining financial stability and market integrity under the FSR Act
The FIC is established under the Financial Intelligence Centre Act (FICA).
95
95 Section 2 of FICA; Chitimira and Munedzi 2021 Journal of Comparative Law in Africa 43; Chitimira 2021 JMLC 790. 96 Chitimira and Munedzi 2021 Journal of Comparative Law in Africa 44; Burchell 2010 SAJCJ 178; De Koker 2003 JMLC 29; see related comments by Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 16. 97 Section 21 of the FICA; see related comments by Chitimira 2021 JMLC 790; Schlenther 2013 JMLC 131; Chitimira and Munedzi 2021 Journal of Comparative Law in Africa 44. 98 Section 76 of the FSR Act; see related comments by Chitimira Market Abuse Regulation 42; Van Niekerk and Van Heerden 2020 SALJ 118; Godwin 2017 LFMR 186; Van Heerden and Van Niekerk 2018 LFMR 158. 99 Section 76 of the FSR Act; ss 4 and 5 of FICA. See related comments by Van Niekerk and Van Heerden 2020 SALJ 125; also see Chitimira Market Abuse Regulation 46. 100 See s 77 of the FSR Act; see related comments by Van Niekerk and Van Heerden 2020 SALJ 125; FIC, SARB and PA 2018 https://www.fic.gov.za/ Documents/MOU%20-%20SARB%20%20FIC%20(Combined).pdf. 101 Sections 76 and 77 of the FSR Act; FIC, SARB and PA 2018 https://www.fic.gov.za/Documents/MOU%20-%20SARB%20%20FIC%20 (Combined).pdf para 5.2.
However, there is no cooperation and collaboration MOUs between the FIC, the courts and law enforcement agencies such as the SAPS. There is a need for cooperation and collaboration MOUs between the FIC and the SAPS to enhance the detection and prosecution of market misconduct matters in South Africa. Such cooperation and collaboration should enable the SAPS to access information held by the FIC to enhance the detection of market misconduct and financial crime which affects financial stability and market integrity. The courts should also hear market misconduct cases that are reported by the FIC.
9 The role and functions of the NCR to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The NCR was established under the National Credit Act
102
102 Section 12 of the NCA; Vessio 2008 SA Merc LJ 228; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 13; Van Heerden 2013 De Jure 969. 103 Section 12(2) of the NCA; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 13; Simpson 2013 Without Prejudice 9; Vessio 2008 SA Merc LJ 228. 104 Sections 13(a)-(d), 14-15 and 16-25 of the NCA; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 13; see related comments by Van Heerden and Coetzee 2011 De Jure 42. 105 Sections 26, 27, 76 and 77 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 119; Chitimira Market Abuse Regulation 41; Godwin, Howse and Ramsay 2017 SALJ 668.
To date, the NCR has entered into several MOUs to promote cooperation, collaboration and information sharing arrangements with the SARB, the FSCA, the PA and the Credit Ombud.
106
106 FSCA and NCR 2018 https://www.fsca.co.za/Regulatory%20Liaison/ MoU_%20FSCA%20and%20NCR.pdf para 2.1.
players. This is essential for effective cooperation and collaboration to promote, protect, enhance and maintain market integrity in South Africa. The NCR has also entered into an MOU with the SARB and the PA to cooperate and collaborate on the promotion of financial stability.
107
107 SARB, PA and NCR 2018 https://www.resbank.co.za/content/dam/sarb/ publications/prudentialauthoritypa-financial/sector-regulation-act/2018/8803/PA-SARB-NCR-Memorandum-of-Understanding.pdf. 108 See SARB, PA and NCR 2018 https://www.resbank.co.za/content/dam/sarb/ publications/prudentialauthoritypa-financial/sector-regulation-act/2018/8803/PA-SARB-NCR-Memorandum-of-Understanding.pdf paras 4.1.2.1-4.1.2.2; see related comments by Van Heerden and Van Niekerk 2017 THRHR 652; Van Heerden, Van Niekerk and Huls 2020 THRHR 501; Godwin, Howse and Ramsay 2017 SALJ 668.
10 The role and functions of the FSIC to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
The role and functions of state organs and cabinet members in promoting, protecting, enhancing and maintaining financial stability and market integrity in South Africa cannot be overemphasised. The FSR Act established the FSIC to facilitate cooperation and collaboration between the cabinet members who are responsible for administering financial sector laws and other role players.
109
109 Section 83(2) of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 118; Godwin, Howse and Ramsay 2017 SALJ 692; see related comments by Qumba 2022 SALJ 97; see related comments by Van Heerden and Van Niekerk 2017 THRHR 652. 110 Section 83 of the FSR Act; Godwin, Howse and Ramsay 2017 SALJ 692; Van Niekerk and Van Heerden 2020 SALJ 118; National Treasury 2011 https://www.treasury.gov.za/twinpeaks/20131211%20-%20item%202%20a%20safer%20financial%20sector%20to%20serve%20south%20africa%20better.pdf 18.
FSCA and the PA. The FSIC comprises of the Minister of Finance, the Minister of Trade and Industry, the Minister of Health and the Minister of Economic Development.
111
111 Section 83(3) of the FSR Act; Schulze 2017 Annual Survey of South African Law 512; Godwin and Schmulow 2015 SALJ 768; Godwin, Howse and Ramsay 2017 SALJ 692.
The FSIC is obliged to facilitate cooperation and collaboration between the SARB, financial regulators and relevant government officials. It ensures that financial sector laws, policies and cabinet decisions do not jeopardise financial stability and market integrity objectives as well as other matters relating to financial sector regulation.
112
112 Section 83 of the FSR Act; Van Niekerk and Van Heerden 2020 SALJ 134. 113 Sections 86(1)(a) and (b) and 86(5) of the FSR Act. 114 Choo 2008 JMLC 372; Choo 2010 Trends and Issues in Crime and Criminal Justice 2; Menz 2020 Journal of Financial Crime 969. 115 Choo 2008 JMLC 373; Choo 2010 Trends and Issues in Crime and Criminal Justice 2; Menz 2020 Journal of Financial Crime 969.
11 The role and functions of the SAPS and the courts to promote, protect, enhance and maintain financial stability and market integrity under the FSR Act
Notwithstanding the fact that the FSR Act does not provide any provisions relating to the roles and functions of the SAPS and the South African courts to promote, protect, enhance and maintain financial stability and market integrity in South Africa, the FICA provides that the FIC may refer suspected market misconduct cases to the SAPS or any other law enforcement authority.
116
116 Sections 44-45 of FICA; Chitimira and Ncube 2020 Acta Universitatis Danubius Juridica 16; see related comments by Chitimira Market Abuse Regulation 41; also see Jooste 1990 De Ratione 25; Jooste 2006 SALJ 289.
threatening financial stability and market integrity while the South African courts adjudicate against the perpetrators on such matters.
117
117 Jooste 1990 De Ratione 25; Jooste 2006 SALJ 289; Chitimira Market Abuse Regulation 46; Chitimira and Lawack 2013 Obiter 216. 118 Jooste 1990 De Ratione 25; Jooste 2006 SALJ 290; Chitimira Market Abuse Regulation 46; Chitimira and Lawack 2013 Obiter 217.
12 Concluding remarks
The promotion, protection, enhancement and maintenance of financial stability and market integrity in South Africa rely on the effective performance of the role and functions of all role players, as discussed in this article. Thus, financial role players such as the SARB, the FSCA, the FIC, the PA, the NCR, the FSIC, the FSCR, the FSIC and the FSCF should adequately and consistently cooperate and collaborate with each other to promote, protect, enhance and maintain financial stability and market integrity in South Africa.
119
119 Van Niekerk and Van Heerden 2020 SALJ 112; Llewellyn "Institutional Structure of Financial Regulation" 28; Godwin and Schmulow 2015 SALJ 758; Godwin 2017 LFMR 185; Godwin, Howse and Ramsay 2017 SALJ 670. 120 Van Niekerk and Van Heerden 2020 SALJ 112; Llewellyn "Institutional Structure of Financial Regulation" 28; Godwin and Schmulow 2015 SALJ 758; Godwin 2017 LFMR 185; Godwin, Howse and Ramsay 2017 SALJ 670.
be statutorily obliged to cooperate and collaborate with the enforcement authorities to ensure the effective detection, investigation and prosecution of any conduct that may negatively affect financial stability and market integrity in South Africa.
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List of Abbreviations
AI |
Artificial |
---|---|
AJICL |
African Journal of International Comparative Law |
APRA |
Australian Prudential Regulatory Authority |
CFR |
Council of Financial Regulators |
EIRP Proceedings |
European Integration – Realities and Perspectives. Proceedings |
FIC |
Financial Intelligence Centre |
FICA |
Financial Intelligence Centre Act 38 of 2001 |
FSCA |
Financial Sector Conduct Authority |
FSCF |
Financial Sector Contingency Forum |
FSCR |
Financial Sector Council of Regulators |
FSIC |
Financial Sector Inter-Ministerial Council |
FSOC |
Financial Stability Oversight Committee |
---|---|
FSR Act |
Financial Sector Regulation Act 9 of 2017 |
Geo J Int'l L |
Georgetown Journal of International Law |
HKLJ |
Hong Kong Law Journal |
IBERJ |
International Business and Economics Research Journal |
IJEBL |
Interdisciplinary Journal of Economics and Business Law |
Int'l Law |
The International Lawyer |
IOSCO |
International Organisation of Securities Commissions |
JBR |
Journal of Banking Regulation |
JBFLP |
Journal of Banking and Finance Law and Practice |
JFC |
Journal of Financial Crime |
JIBFL |
Journal of International Banking and Financial Law |
JIMF |
Journal of International Money and Finance |
JMLC |
Journal of Money Laundering Control |
LFMR |
Law and Financial Markets Review |
MOU |
Memorandum of Understanding |
NCA |
National Credit Act 34 of 2005 |
NCR |
National Credit Regulator |
PA |
Prudential Authority |
PRA |
Prudential Regulatory Authority |
PEPs |
politically exposed persons |
SA Merc LJ |
South African Mercantile Law Journal |
SAJCJ |
South African Journal of Criminal Justice |
SALJ |
South African Law Journal |
SAPS |
South African Police Service |
SARB |
South African Reserve Bank |
SEC |
Securities and Exchange Commission |
THRHR |
Tydskrif vir Hedendaagse Romeins-Hollandse Reg |
UK |
United Kingdom |
Wm & Mary Bus L Rev |
William and Mary Business Law Review |