People and Risk Management

Purpose of People and Risk Management

• Individuals in management positions or who control an authorised user must fulfill certain requirements as per the Act.
• Proper roles of authorised user officers are explored.
• Key individuals are essential for risk mitigation.
• Internal controls should be implemented within an authorised user's business to mitigate risks.

Fit and Proper Requirements

• Natural shareholders with controlling interest, directors, compliance officers, settlement officers, and traders must meet fit and proper requirements across exchanges.
• Fit and proper requirements ensure individuals are beyond reproach through due diligence.
• Individuals must have full legal capacity, not be un-rehabilitated insolvent, and fulfill criteria of good character and high business integrity to be employed.
• Criteria taken into account to determine good character and business integrity include:
  • Conviction of criminal offenses involving fraud, theft, dishonesty, or market abuse.
  • Being held civilly or administratively liable for fraud, theft, dishonesty, or market abuse.
  • Contravention of legislation regarding market abuse, money laundering, or terrorist financing.
  • Disqualification from acting as a company director.
  • Subject of formal investigation by regulatory or government agency.
  • Expulsion from any exchange.
  • Association with an authorised user expelled from an exchange.
  • Declaration as a defaulter on the JSE or any other exchange.
  • Refusal of entry or expulsion from a profession, dismissal, or resignation request.
  • Refusal or involuntary withdrawal of approval by a regulatory authority.
• Consent is required if an authorised user employs a person meeting specific criteria.
• Consent may be limited and withdrawn with one calendar month's notice.
• Criteria where consent is needed includes:
  • Being an officer of a member expelled from the exchange.
  • Refusal of admission to or expulsion from the Institute.
  • Refusal of approval to operate as a financial services provider or authorised representative under the FAIS Act.
  • Expulsion from any other exchange.
  • Being an un-rehabilitated insolvent, declared a defaulter, or convicted of dishonesty-related crimes.

Compliance Officers and Function

• Compliance officers assist in ensuring compliance with the Act, Exchange Rules, and Directives.
• They report breaches of the Act or Rules and communicate exchange information to staff.
• Must be qualified by exams and maintain knowledge.
• Compliance officers are required for admittance to the relevant Exchange.
• In their absence, a senior employee fulfills the role for a limited time and must meet fit and proper requirements.
• Compliance Officer must implement resources, systems, and procedures to promote compliance under JSE Rules (4.30.2).

Settlement Officers and Function (JSE)

• Settlement Officers act as a point of contact for exchange settlement queries.
• They ensure procedures are in place and action is taken to secure settlement.
• Advise the exchange of any settlement issues and must be qualified by exams and maintain knowledge.
• Settlement officers are admittance requirement for relevant Exchange.
• In absence, a senior employee fills for a limited time and must meet fit and proper requirements.
• Alternative Settlement Officers have the same requirements and responsibilities.
• Members still have responsibility for equity security transactions even when appointing a CSP or settlement agent.

Qualifications

• Employees cannot manage JSE authorized investments or advise on buying/selling without proper qualifications as stated in the directives per JSE Rule 4.50.

Control of offices as required by the JSE (4.60)

• The primary place of business must be controlled by a stockbroker who is an executive director.
• Branch offices need control by a full-time employed stockbroker.
• Agency offices need a full-time employed stockbroker or a qualified compliance officer (Rule 4.30.1).
• Primary places and branch offices of CSPs not authorized to provide trading services may be controlled by a qualified compliance officer.
• Vacant stockbroker or compliance officer positions must be filled within two months, subject to Director Surveillance discretion (Rules 4.60.1 to 4.60.4).
• The person in charge of a member's business place must reside in the area where that business is located.

Internal Control and Risk Management

• Authorised users must meet risk management requirements for effective business operations.
• This involves maintaining resources, procedures, technological systems, and internal controls.
• The business should be carried out efficiently
• Financial and other information should be reliable. All member transactions should be recorded.
• Procedures to safeguard assets and to control liabilites
• Appropriate levels of insurance cover.
• Market abuse should be managed and procedures put in place for this.

Principles and Procedures of risk management

• Records are maintained to allow disclosure of financial and business information and enable the member to monitor the quality of the member's assets.
• Records assist to identify, quantify, control and manage the risk exposures of the member and enable them to make informed business decisions
• Records allow for monitoring the capital to ensure compliance and assist in monitoring the performance and all aspects of the business of the member