Happy Shihau | Head | Compliance | Investec | mail me |
In a first for the local financial services sector, a diverse collaborative industry work group established following the inaugural SA Market Surveillance Conference held last year, has developed a draft industry code of conduct to guide financial institutions and align with international standards to bolster market surveillance in the country.
The need to develop the SA Market Surveillance Code of Conduct emerged as a key objective during the conference.
The local financial services sector has faced numerous challenges in its ability to monitor, detect and prevent various forms of market abuse, such as insider trading, price or market manipulation, and the dissemination of false or misleading statements. These deficiencies erode financial market and investor confidence, hampering investment, wealth creation and economic growth.
Improving awareness of industry best practices
In an effort to maintain the integrity and stability of the financial system, the SA Market Surveillance Conference identified multiple requirements, such as improving awareness of industry best practices, implementing stricter controls, and increasing the number of skilled surveillance analysts in the sector.
Establishing a SA Market Surveillance Code of Conduct emerged as a critical requirement to promote fit and proper conduct across the financial services sector while setting higher industry standards to protect the local market against abuse, manipulative, anti-competitive and illegal trading practices, which could lead to potential exclusion from global institutions.
With so many industry role players working to improve transparency, accountability, and ethical behaviour in a well-functioning market, a Code of Conduct establishes a set of guiding principles for all financial market participants to follow.
Numerous industry workshops took place following last year’s event, where major role players from major financial institutions, regulatory bodies and other appropriate authorities collaborated to develop the code. The working group included representatives from Investec, the Johannesburg Stock Exchange (JSE), the South African Institute of Financial Markets (SAIFM), and FSCA, among other contributors including some of the large South African banks and brokers in the market.
Maintaining fair and transparent financial markets
The resultant document stems from extensive consultation between these stakeholders to define the standards that signatories are expected to uphold when participating in the South African financial market. This SA Market Surveillance Code of Conduct is a strong indicator of the local financial industry’s commitment to ensuring that it maintains fair and transparent financial markets that safeguard investor funds.
The code of conduct also seeks to support legislation aimed at improving transparency and enhancing controls. While voluntary and not legally binding, this proposed SA Market Surveillance Code of Conduct will complement changes to legislation and help to enhance and reinforce the regulatory environment.
The SA Market Surveillance Code of Conduct details how the members of an exchange should conduct themselves in an ethical, fair, transparent, and responsible way that promotes the integrity and proper functioning of South Africa’s financial markets and reduces systemic risk, by ensuring all participants effectively manage their market abuse risk.
It also covers various aspects, including communication surveillance, chat room principles, social media monitoring and oversight, trade surveillance, remote working, algorithmic trading governance process, and aspects of market conduct, such as dealing with confidential information, mitigating financial crime risk, and sharing information.
In conclusion
The South African financial sector has an important role to play in driving global best practices as the world becomes more integrated.
Local financial markets should adopt transparent and fair market practices to protect the integrity of our sector. By guiding all stakeholders to comply with relevant regulations while adopting best practices, the code will improve market integrity and contribute to building a positive reputation for the South African financial market. This should give international investors the confidence to invest in the country so that everyone benefits from knock-on effects like economic growth and job creation. We all have a role to play and it’s important we acknowledge it.
– Themba Maseko, Market Surveillance Senior Analyst (Compliance) at Investec Bank
Related FAQs: South African Market Surveillance Code of Conduct
Q: What is the South African Market Surveillance Code of Conduct?
A: The South African Market Surveillance Code of Conduct is a framework designed to enhance the integrity and transparency of local financial markets by establishing guidelines for the conduct of market participants.
Q: How will the Code of Conduct address market abuse?
A: The Code of Conduct will enhance the current regulatory framework and provide guidance around insider trading, prohibited trading practices (price/market manipulation) and dissemination of false or misleading statements and any anticompetitive practice to ensure effective controls against market abuse.
Q: What role does the Financial Sector Conduct Authority (FSCA) play in this initiative?
A: Our regulators play an important role in safeguarding our financial market and they have been part of the journey and have participated in the working groups that drafted the SA Market Surveillance draft Code of Conduct. They have played an important role in contributing to the content. But all stakeholders have an important role to play to safeguard the SA financial market. The responsibility does not sit with the regulators
Q: What types of market abuse does the Code of Conduct focus on?
A: The Code addresses three forms of market abuse: insider trading, market manipulation and the dissemination of false or misleading information regarding securities.
Q: How will the launch of this Code impact investment strategies in South Africa?
A: The launch of the Code is expected to create a more robust investment landscape, fostering greater investor confidence and potentially attracting more retail and institutional investors.
Q: What are the implications for compliance officers in financial firms?
A: As the world becomes more complicated, compliance officers will be required to adapt and upskill, qualifying them to manage the complexities that come with market evolution which include, dealing with technological advances, data analysis, identify risks and build effective controls.
Q: Can technology, such as Artificial Intelligence (AI), play a role in monitoring compliance with the new Code?
A: Yes, technological advancements, including artificial intelligence, can be utilised to generate real-time intelligence on trading activities, aiding in the detection of potential market abuse.
Q: What is the expected momentum around the implementation of the Code of Conduct?
A: The momentum is expected to build steadily as financial sector participants adopt the code which is expected to be launched next year with the aim of fostering a collective effort to maintain market integrity.
Q: Where can I find more information about the South African Market Surveillance Code of Conduct?
A: More information can be found on financial news websites such as www.investec.com and Bloomberg, which provide updates and insights on the evolving regulatory landscape in South Africa.
