JSE Member Management and Control

• Management and control is key

Fit and Proper Requirements

• An officer or non-executive director of a member, or a shareholder who is a natural person and who directly or indirectly holds in excess of 10% of the issued shares of a member is subject to a standard.
• They must be of full legal capacity
• They cannot be an un-rehabilitated insolvent
• They have to comply with the good character and high business integrity criteria set by the JSE.

Employing Certain Persons Requires Consent

• No member may employ certain persons without the JSE's written consent:
• Those who were officers of a member expelled from the JSE.
• Those who refused admission to or were expelled from membership of the Institute.
• Those who were refused approval to operate as a financial services provider or an authorized representative under the FAIS Act.
• Those who were expelled from any other exchange.
• Those who are unrehabilitated insolvents, declared defaulters by the JSE, or convicted of theft, fraud, forgery, or any crime involving dishonesty.
• The JSE's consent can be time-limited and withdrawn with one calendar month's notice.

Basic Structure

• An authorized user needs key individuals to ensure they can perform securities services.
• Broking firms are generally managed by a board of directors.
• A Stockbroker must control every authorized user as per JSE and A2X rules.
• The front, middle, and back offices must be separate.
• A Compliance Officer monitors all functions to ensure compliance and assists the board.

Key Personnel Definitions

• Senior Management (FMA): the level of management directly accountable to the chief executive officer or person in charge of the entity, including the CEO if not a director.
• Stockbroker (FMA): a natural person who is a member of the South African Institute of Stockbrokers.
• Compliance Officer (JSE): Appointed by a member to assist the board in ensuring compliance
• Registered Securities Trader (JSE): An employee of a member, registered with the JSE, authorized to enter and execute orders through the JSE equities trading system on behalf of the member.
• Settlement/Alternate Officer (JSE): Manages a member’s obligations relating to the settlement of equity transactions.

Client Types

• Two main client types exist in the South African equities market: non-Controlled and Controlled clients.
• The distinction is important due to its impact on various requirements and processes, including mandate type, custody and administration of assets, segregation of assets, settlement obligations and timelines, and pledging/ceding of assets.
• A client is any person to whom an authorized user provides securities services, including an agent of such a person

Non-Controlled vs. Controlled Clients

• The key difference between the two is custody of assets
• Non-Controlled: Maintains custody of its own assets
• Controlled: Assets are in the custody of an authorized user
• JSE is the only exchange that allows its authorized users to be Custody Services Providers.

Compliance Officers Responsibilities

• A member must appoint a compliance officer to assist the board in ensuring compliance with regulations.
• Appointees must pass the JSE compliance officer exam and maintain adequate knowledge of the Act, rules, and directives.
• The compliance officer must implement resources, systems, and procedures for compliance, report breaches to the Director: Market Regulation, and ensure communication of JSE Gazettes.
• In the absence of a compliance officer, a senior employee may temporarily assume responsibilities for no longer than 2 months, with Director: Market Regulation approval.

Settlement Officers

• Members must appoint a settlement officer to manage obligations related to settling equity security transactions
• Appointees must pass the settlement officer exam and maintain adequate knowledge of JSE settlement rules.
• Settlement officers must handle JSE settlement queries, ensure appropriate procedures, advise the JSE on potential settlement issues, and cooperate with the Settlement Authority.
• An alternate settlement officer must also be appointed and meet the requirements of the rules.
• Appointments must align with an application to the JSE for membership, and the member retains overall responsibility for compliance with settlement-related rules.

Qualifications to Provide Advice

• A directive outlines the qualification requirements for employees of a member who manages investments or provides investment advice.
• This includes equity securities, authorized investments not traded on a JSE market, securities traded on a JSE market of which the equities member is not a member, derivative securities, agricultural and foreign commodity derivatives, bonds, interest rate and currency derivatives, transitional provision, and exemptions from Registered Persons Examinations.

Control of Offices

• A primary place of business must be controlled by a stockbroker who is an executive director of the member
• A branch office of a member needs to be controlled by a stockbroker in the full-time employ of the member
• An agency office of a member can be under the control of a stockbroker, a full-time employee, or a staff member having achieved a pass mark on the compliance officer exam
• A primary place of business and branch office of a CSP not authorized to provide trading offerings may be under the control of a person who has passed the compliance officer examination.
• Vacant positions must be filled within 2 months, or as the Director: Market Regulation determines.
• The person in control of a place of business must reside in the area where the business is located.

Branch and Agency Offices

• Opening or maintaining a branch or agency office requires prior JSE consent.