Trading and Bond Management Overview
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Questions and Answers

What must a trading member do to ensure compliance when placing an order for bonds?

  • Verify if the client is a trading member settled client. (correct)
  • Place orders based solely on client requests without CSDP confirmation.
  • Confirm the client's CSDP has matching details with the trading member. (correct)
  • Check if the settlement date is a public holiday.

    • In what circumstance can a trading member sell bonds held on behalf of a client?

  • If an internal committee approves the sale.
  • Only if the client explicitly requests the sale.
  • Under circumstances outlined in the IRC Rules. (correct)
  • Whenever the market price exceeds a specific threshold.

    • How should the accounting records for bonds purchased on behalf of trading member settled clients be maintained?

  • Records can be maintained quarterly to reduce paperwork.
  • They should reflect the purchase date but not client identity.
  • Records must be classified based on bond type.
  • They must be recorded on the day of purchase to identify the client. (correct)

    • What is the prescribed method for settling all transactions in bonds?

    <p>Electronic settlement through Strate.</p> Signup and view all the answers

    What is required regarding the CSDP when dealing with clients not classified as trading member settled clients?

    <p>The trading member must check with the client if they have appointed a CSDP.</p> Signup and view all the answers

    What is the primary requirement regarding representations made to clients by a trading member?

    <p>They must be factually correct.</p> Signup and view all the answers

    When may repeated disclosures to the same client be necessary?

    <p>When there are material or significant changes affecting the client.</p> Signup and view all the answers

    What type of language should be avoided when providing information to clients?

    <p>Plain language that may lead to confusion.</p> Signup and view all the answers

    Which obligation must a trading member fulfill concerning the fees charged to clients?

    <p>They must disclose full and accurate information about all fees and charges.</p> Signup and view all the answers

    Under what condition can confidential client information be disclosed by a trading member?

    <p>With the prior written consent of the client.</p> Signup and view all the answers

    What is a requirement for trading members when dealing with the JSE as a regulator?

    <p>They must communicate in an open and co-operative manner.</p> Signup and view all the answers

    What is a key responsibility of a trading member concerning its employees in relation to the code?

    <p>To enforce the provisions of the code on all employees.</p> Signup and view all the answers

    When can a trading member engage in a transaction following an unsolicited call?

    <p>If they comply with the IRC Rules.</p> Signup and view all the answers

    Which statement about advertising by trading members is NOT allowed?

    <p>They must not emphasize the risks of loss in trading.</p> Signup and view all the answers

    What must advertising material emphasize according to the regulations?

    <p>The risks of loss and uncertainty of future returns.</p> Signup and view all the answers

    What is the latest time a non-member settled client's CSDP must commit to settling a transaction on the settlement date?

    <p>15h00</p> Signup and view all the answers

    What action must a trading member take if the CSDP has not committed by 13h00 on the settlement date?

    <p>Cover the uncommitted transaction</p> Signup and view all the answers

    If a trading member fails to cover an uncommitted transaction by 14h00, what is the next step?

    <p>Receive instructions from the Settlement Authority</p> Signup and view all the answers

    What is required of the trading member if they become aware that a client cannot settle a transaction?

    <p>Make arrangements for alternative settlement</p> Signup and view all the answers

    What can the Settlement Authority declare if they receive notification of a failing trade?

    <p>Roll over the transaction</p> Signup and view all the answers

    Which of the following actions is NOT permitted for a trading member regarding a client's bond balances?

    <p>Using them only for the specified client's transactions</p> Signup and view all the answers

    By what time must a trading member ensure that a CSDP commits to covering an uncommitted transaction, if needed?

    <p>14h00</p> Signup and view all the answers

    If the settlement date is approaching and the trading member has not covered the uncommitted transaction, what remains their responsibility?

    <p>Ensure the CSDP commits by 15h00</p> Signup and view all the answers

    What is a key requirement for the client statement regarding investments or funds represented in foreign currency?

    <p>The relevant currency exchange rate at the reporting date</p> Signup and view all the answers

    Which of the following details must be included in the client statement regarding income and expenditure?

    <p>Details of income earned and expenditure incurred during the reporting period</p> Signup and view all the answers

    Which information must be provided about investments transferred during the reporting period?

    <p>Investments transferred into and out of the portfolio during the reporting period</p> Signup and view all the answers

    What must be identified on the client statement regarding investments loaned to third parties?

    <p>Those investments which were loaned to a third party but still accountable to the client</p> Signup and view all the answers

    What aspect of derivatives must be described in the client statement?

    <p>A description of the underlying financial product, index, commodity, expiry month, and strike price for options</p> Signup and view all the answers

    Which of the following must be included in the client statement regarding collateral?

    <p>The quantity, description, and market value of any financial products held as collateral on behalf of the client</p> Signup and view all the answers

    What must be included in the client statement regarding the funds invested on behalf of the client?

    <p>The amount of funds held or invested by the trading member on behalf of the client</p> Signup and view all the answers

    What should the client statement indicate if investments or funds are not held by the trading member?

    <p>The fact that the trading member is not accountable for such investments</p> Signup and view all the answers

    What is the primary condition under which an investment manager may conduct transactions in JSE authorised investments other than IRC securities on behalf of a client?

    <p>The client has provided written consent through a specific mandate.</p> Signup and view all the answers

    Which of the following is NOT a requirement for an investment manager when purchasing JSE authorised investments other than IRC securities on behalf of a client?

    <p>Maintaining a shared account with other investment managers.</p> Signup and view all the answers

    What must an investment manager do if discrepancies are found between their records and those of financial services providers regarding client investments?

    <p>Rectify the differences immediately upon identification.</p> Signup and view all the answers

    When investments other than IRC securities are held in another financial institution's account, how should the account be managed?

    <p>Opened in the client’s name or designated solely for client transactions.</p> Signup and view all the answers

    What is the function of the records that the investment manager must maintain regarding JSE authorised investments other than IRC securities?

    <p>To identify the beneficial owners and maintain transaction history.</p> Signup and view all the answers

    What is required regarding the reconciliation of the clients' holdings in JSE authorised investments other than IRC securities?

    <p>It must take place monthly to ensure accuracy of investment records.</p> Signup and view all the answers

    Which requirement ensures that an investment manager acts with due regard for client interests?

    <p>Adhering to provisions related to the conduct of trading members.</p> Signup and view all the answers

    What does maintaining proper accounting records mean for an investment manager handling JSE authorised investments other than IRC securities?

    <p>Keeping accurate and current records available at all times.</p> Signup and view all the answers

    What is the maximum time allowed for a trading member to respond to a client complaint?

    <p>4 weeks</p> Signup and view all the answers

    Which of the following must be included in the record of a complaint maintained by a trading member?

    <p>The identity of the complainant</p> Signup and view all the answers

    What qualifies a complaint as unresolved according to the guidelines?

    <p>The complainant is dissatisfied with the proposed resolution</p> Signup and view all the answers

    Which statement is true regarding the authority of the employee responsible for resolving complaints?

    <p>They must have the necessary authority or access to one who does</p> Signup and view all the answers

    What is a trading member required to do if they decide on compensation as redress?

    <p>Provide fair compensation and comply with the offer accepted</p> Signup and view all the answers

    Which procedure should a trading member implement to handle complaints effectively?

    <p>Ensure all complaints are handled promptly and fairly</p> Signup and view all the answers

    For how long must a trading member retain a record of client complaints?

    <p>5 years</p> Signup and view all the answers

    Which of the following best describes a key duty of relevant employees in complaint handling?

    <p>They should be aware of and comply with internal procedures</p> Signup and view all the answers

    What does the Settlement Authority need to assess before rolling a transaction to a later date?

    <p>Exceptional circumstances that warrant rolling</p> Signup and view all the answers

    What information is included in the list of settlements obtained by the Settlement Authority?

    <p>The failed trade leg and the opposite trade leg</p> Signup and view all the answers

    What instruction is given to members once a transaction is rolled to a revised settlement date?

    <p>Re-book the original transaction at the original yield</p> Signup and view all the answers

    What happens if settlement does not occur on the revised settlement date?

    <p>The Settlement Authority will roll it to another date under exceptional circumstances</p> Signup and view all the answers

    What determines whether the JSE considers a member to be in default?

    <p>The inability to settle on the further revised settlement date</p> Signup and view all the answers

    What is the role of the CSD in the rolling of settlement process?

    <p>To supply a list of Bond ETP settlements not effected</p> Signup and view all the answers

    Which member is responsible for reporting the transaction to the ETP fails management trading system?

    <p>Both failing and non-failing members</p> Signup and view all the answers

    What must the Settlement Authority determine regarding the member's ability to settle a transaction?

    <p>If the member will be able to settle on a later date</p> Signup and view all the answers

    Under which circumstance do dispute resolution rules apply to trading members?

    <p>When the dispute is not subject to any prior litigation and exceeds R2 000.</p> Signup and view all the answers

    What is required for a trading member's dispute with another trading member to be taken further?

    <p>Both trading members must have attempted to resolve the dispute and obtained consent.</p> Signup and view all the answers

    What is the timeframe for reporting a dispute between two trading members regarding transactions in IRC securities?

    <p>Within 1 week of the circumstance that led to the dispute.</p> Signup and view all the answers

    What action does the Company Secretary of the JSE take upon receiving a report of a dispute?

    <p>Declares it a dispute and refers it to an appointed ombud.</p> Signup and view all the answers

    What condition must be met for disputes involving a trading member and a client to be further pursued?

    <p>The client must provide their consent to proceed.</p> Signup and view all the answers

    If a client chooses to appeal a decision made by the JSE Market Regulation Division, what happens next?

    <p>The unresolved complaint is reported as a dispute to the Company Secretary.</p> Signup and view all the answers

    Which statement is correct regarding the consent of parties in dispute resolution?

    <p>Both parties must consent regardless of the amount in dispute for trading members.</p> Signup and view all the answers

    How long does a trading member have to report a dispute with a client regarding IRC securities?

    <p>6 months after the circumstance causing the dispute arises.</p> Signup and view all the answers

    What is the latest time a trading member must ensure settlement for same day trades?

    <p>13h00 on the trade date</p> Signup and view all the answers

    If a trading member settled client fails to secure an uncommitted transaction by 14h00, which action must the trading member NOT take?

    <p>Ignore the lack of compliance</p> Signup and view all the answers

    What must a trading member do when acting on behalf of a trading member settled client if that client fails to comply with settlement rules?

    <p>Ensure the transaction settles despite the failure</p> Signup and view all the answers

    When must a trading member ensure that its CSDP is ready to recommit to settle a transaction?

    <p>By 15h00 on the settlement date</p> Signup and view all the answers

    What is the deadline for the CSDP's commitment to settle transactions due three business days after the trade date?

    <p>19h00 on the preceding business day</p> Signup and view all the answers

    In the event of client non-compliance with the IRC Rules, what might a trading member do regarding a sale transaction?

    <p>Buy bonds on behalf of the trading member</p> Signup and view all the answers

    What steps might a client need to undertake by 14h00 on the settlement date if there's an uncommitted transaction?

    <p>Cover the uncommitted transaction</p> Signup and view all the answers

    Which of the following best describes a trading member's obligation regarding bond transactions?

    <p>Endeavor to settle transactions in bonds effectively</p> Signup and view all the answers

    Study Notes

    Trading Member Obligations

    • Trading members must appoint a Central Securities Depository (CSDP) as prescribed by directive.
    • Trading members must verify that clients have appointed a CSDP and that the client details match between the trading member and the CSDP.
    • Trading members must ensure settlement of bond transactions occur on the settlement date.
    • Trading members must record all bonds purchased for trading member settled clients in their accounting records to establish client identity.

    Bond Borrowing, Lending, and Use

    • Trading members may deliver bonds to clients or their order.
    • Trading members may use client bonds to satisfy a sale made on behalf of the client.
    • Trading members may sell bonds held on behalf of a client under circumstances outlined in the IRC Rules.
    • Trading members may deal with bonds, including borrowing, lending, or use in accordance with a client mandate signed by the client and held by the trading member.

    Bond Settlement

    • All bond transactions must be settled electronically through Strate.
    • If a non-member settled client cannot ensure their CSDP can commit to settling a transaction by 19:00 on the business day preceding the settlement date, the trading member must take steps to ensure the CSDP commits to settlement by 13:00 on the settlement date.
    • If the CSDP does not commit by 13:00, the trading member must cover the uncommitted transaction through borrowing, lending, or other means.
    • The trading member must ensure the CSDP can commit to settlement by 15:00 on the settlement date. If the trading member fails to cover the uncommitted transaction by 14:00, the Settlement Authority will instruct the trading member to cover it.
    • If a client cannot settle a transaction, the trading member must try to enter an arrangement to ensure the transaction settles on the settlement date. If unable, the trading member must notify the Settlement Authority.
    • If the Settlement Authority rolls the settlement or declares the transaction a failed trade, the trading member must follow the Settlement Authority's instructions.
    • Trading members cannot use a client's bond balances to settle the obligations of another client or the trading member itself.

    Client Disclosure

    • Representations made and information provided to clients by trading members must be factually correct, provided in plain language, adequate and appropriate, and expressed in specific monetary terms.
    • Trading members must disclose full and accurate information about fees and charges.
    • Trading members cannot disclose confidential client information without prior written consent unless required by law or to further the objects of the Act.
    • Trading members must advise clients in advance of any restrictions affecting access to funds or JSE authorized investments.

    Client Record Maintenance

    • Trading members must maintain proper, complete, accurate, and secure records related to client services.

    Cooperation with Regulators

    • Trading members must deal with the JSE in an open and cooperative manner and keep the JSE informed of anything concerning the JSE that might reasonably be expected to be disclosed.
    • Trading members must provide reasonable cooperation to regulatory bodies and law enforcement agencies investigating potential contraventions of the Act or other relevant legislation.

    Enforcement of Code on Employees

    • Trading members must enforce the provisions of this code on all employees.

    Unsolicited Calls

    • Trading members can enter into transactions resulting from unsolicited calls provided they comply with IRC Rules.

    Advertising by Trading Members

    • Advertising material must provide accurate, complete, and unambiguous information.
    • Advertising must emphasize risk of loss and uncertainty of future results.
    • Fact must be discerned from opinion.
    • Advertising cannot make comparative statements about other trading members.
    • Advertising cannot suggest that trading in derivative instruments is appropriate for all persons.

    Client Statements

    • Client statements must include:
      • The quantity, description, and market value of each investment in the portfolio at the reporting date.
      • The amount of funds held or invested by the trading member on behalf of the client at the reporting date.
      • Relevant currency exchange rates for investments or funds reflected in foreign currency.
      • Investments purchased or sold during the reporting period.
      • Receipts and payments of funds during the reporting period.
      • Details of income earned and expenditure incurred during the reporting period.
      • Non-cash transactions during the reporting period.
      • Investments transferred in and out of the portfolio during the reporting period.
      • Identification of investments loaned to third parties but for which the trading member is still accountable to the client.
      • Quantity, description, and market value of financial products or funds held as collateral by the trading member on behalf of the client in respect of any loans made by the client.
      • Identification of investments or funds utilized to secure loans to the client or borrowings made on behalf of the client.
      • Identification of investments or funds utilized as margin in respect of open positions in any financial product.
      • Description of the underlying financial product, index, commodity, or thing, expiry month, and in the case of options, the exercise or strike price, for investments in derivative instruments.
      • A clear indication if investments or funds are not held by the trading member and the trading member is not accountable to the client.

    Rolling of Settlement

    • The Settlement Authority may roll the settlement of a transaction to a later date if exceptional circumstances exist and the member will be able to settle on a later date.
    • The Settlement Authority will obtain a list of Bond ETP settlements from the CSD that will not be effected on the due settlement date.
    • The Settlement Authority will advise the failing and non-failing members that the transaction will be rolled to a revised settlement date determined by the Settlement Authority.
    • The failing and non-failing members will be instructed to re-book the original transaction at the original yield for settlement on the revised settlement date.
    • If settlement does not take place on the revised settlement date, the Settlement Authority may roll the settlement to another revised settlement date, with the JSE considering whether the member is in default.

    Trading Member Settled Client Settlement Obligations

    • Trading members settled clients must ensure that the trading member which effected the transaction for or on behalf of the client will be able to settle the transaction on settlement day.
    • The client must take the necessary steps by 14h00 to cover the uncommitted transaction.
    • If a trading member settled client fails to comply with the provisions, the trading member is obliged to take the necessary steps to ensure that the transaction settles on settlement day.
    • The trading member may buy such bonds for the account of the client in respect of a sale transaction, or sell such bonds for the account of the client in respect of a purchase transaction.
    • The trading member settled client shall remain liable for any losses, costs and charges incurred, or charges imposed, by the trading member.

    Trading Member Settlement Obligations

    • Trading members shall at all times endeavor to ensure that the settlement of a transaction in bonds effected by the trading member takes place.
    • Investment managers shall not effect transactions in JSE authorized investments other than IRC securities on behalf of a client unless the client has given general consent to such transactions being effected in a written mandate.
    • Investment managers who purchase JSE authorized investments other than IRC securities on behalf of a client shall comply with the following requirements:
      • The relevant investments shall be segregated from the investment manager's own assets at all times.
      • The investment manager shall maintain proper accounting records in respect of all JSE authorized investments other than IRC securities purchased or sold on behalf of clients.
      • The investment manager must balance its clients' holdings in JSE authorized investments other than IRC securities on a monthly basis.

    Trading Member Complaint Handling Procedures

    • Trading members' internal complaint handling procedures must be designed to ensure:
      • All complaints are handled fairly, effectively, and promptly.
      • Recurring or systemic problems are identified, investigated, and remedied.
      • The number of unresolved complaints to be referred to the JSE in terms of the rule 5.60 are minimized.
      • Complaints are investigated by an employee of sufficient competence.
      • The employee responsible for the resolution of complaints has the necessary authority to resolve complaints.
      • Relevant employees are aware of the trading member's internal complaint handling procedures and comply with them.

    Timeous Response to Complaints

    • Trading members must respond to client complaints within four weeks of receiving the complaint or, within such period, provide the complainant with an appropriate explanation as to why the trading member is not, at that time, in a position to respond and must indicate by when the trading member will respond.

    Redress

    • If a trading member decides that redress in the form of compensation is appropriate in resolving a complaint, the trading member must provide the complainant with fair compensation.
    • If a trading member decides that redress in a form other than compensation is appropriate in resolving a complaint, the trading member must provide the redress as soon as practicable.

    Recording of Complaints

    • Trading members must maintain a record of all client complaints.
    • The record of each complaint must include the identity of the complainant, the substance of the complaint, and all correspondence in relation to the complaint.

    Unresolved Client Complaints

    • A client complaint will be deemed to be unresolved if the complainant is not satisfied with the resolution of the complaint proposed by the trading member.
    • A complainant may lodge an unresolved complaint with the Director: Market Regulation.
    • The dispute resolution rules only apply where:
      • The amount in dispute is in excess of R2 000.
      • The dispute is not the subject of existing litigation.
      • In the case of a dispute that a client has with a trading member, where the amount in dispute either does not exceed R500 000 or, where the amount in dispute exceeds R500 000, if the consent of both parties to proceed has been obtained.
      • In the case of a dispute that a trading member has with another trading member, and the trading members are able to evidence to the satisfaction of the Director: Market Regulation that reasonable endeavors have been made by the said trading members to resolve the dispute, if the consent of both parties to proceed has been obtained.
      • In the case of a dispute that a trading member has with a client if the consent of the client to proceed has been obtained.

    Reporting of a Dispute

    • An unresolved client complaint that the JSE Market Regulation Division is not able to resolve will be reported as a dispute by the Director: Market Regulation to the Company Secretary of the JSE if the client elects to pursue the dispute resolution process.
    • A dispute between two trading members in respect of transactions in IRC securities must be reported in writing to the Company Secretary of the JSE within one week of the circumstance giving rise to the dispute having arisen.
    • A dispute that a trading member has with a client in respect of transactions in IRC securities must be reported in writing to the Company Secretary of the JSE within six months of the circumstance giving rise to the dispute having arisen.
    • The Company Secretary of the JSE may request any of the parties to a dispute to furnish him with such further information relating to the dispute as may be required.

    Declaration of a Dispute

    • A dispute reported will, having been met, be declared a dispute by the Company Secretary and will be referred by the Company Secretary to a duly appointed ombud for consideration.

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    Description

    This quiz covers the obligations of trading members in managing bond transactions, including the appointment of Central Securities Depositories and the settlement processes involved. Additionally, it examines the protocols around bond borrowing, lending, and the client's mandate. Test your knowledge on essential procedures and regulations governing bond trading.

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