Supervisory Approach & Strategy
Strate Supervision strives to build fair and credible supervisory processes consistent with low to medium intensity supervision. Strate aims to apply and enforce its supervisory approach consistently.
Risk based Supervision Extensive work was conducted during the past few years to identify and fully understand the scope of Strate’s supervisory responsibilities and the ambit of regulatory risks. This has resulted in the development of the Regulatory Pyramids, a comprehensive Regulatory Risk Summary and specifically the development of a variety of “supervisory tools”. These tools are defined as the sources of information used by the Supervision division to identify, manage and mitigate the various regulatory risks.
Participant Performance Monitoring ModelThe supervisory tools include, inter alia, information received by the appointed Strate Compliance Officers, external and internal auditors and, most importantly, information extracted from the Strate settlement systems. The information is collated on a monthly basis into what is known as the Participant Performance Monitoring Model (PPMM). Obtaining a regular and consistent understanding of the risk profile of the Participant is important. The PPMM incorporates a broad spectrum of information gathered on the performance of a Participant including, for example, the number and frequency of settlement transgressions (i.e. penalties); outstanding client mandates and imbalances in their record keeping. This information is risk weighted and “scored” in terms of pre-determined scales. Implementation of this model has enabled the Supervision division to monitor and track Participant performance using an objective, risk based method. Low scores would indicate areas of concern or weaknesses which need to be addressed.
Compliance OfficersStrate Compliance Officers play a vital role and are a key supervisory tool. Monthly Compliance Officer Forums are held to discuss, debate and share knowledge on new Rules and Directives or amendments, changes to operational procedures or new market practices. The structure that is being supported is one which cultivates the independence of the Compliance Officer role and one which encourages their performance as Strate’s “eyes and ears” within their respective organisations. The roles and responsibilities of the Compliance Officer in terms of the Rules requires daily review, monitoring and investigation and immediate notification to Strate Supervision when errors or transgressions are evident.
On-Site VisitsThe on-site program was developed as a proactive supervisory tool and was implemented during 2005. Generally the findings of the on-site visits have evidenced robust and strict control environments within the Participants. Staff and management have shown high levels of knowledge and skills. Such weaknesses as were disclosed related to the need for higher levels of management oversight or the implementation of stricter systems controls.
SAICA GuidelinesDiscussions with the South African Institute of Chartered Accountants (“SAICA”) commenced in 2003 with a view of stipulating and standardising the audit reporting to Strate by the external auditors of Participants. A working committee was formed to draft the Strate SAICA - guidelines that were eventually approved by SAICA and the Controlling Body in August 2003. The guidelines have been amended following the promulgation of the SSA.
ComplaintsInvestor complaints are received directly or via the FSB. The nature of such complaints cover issues surrounding service fees, statements and corporate action entitlements. A total of 7 complaints were received during 2005. The only complaints that have been lodged to date have been from private investors. Notwithstanding this, Strate Supervision can confirm that Participants have always responded timely and resolved all complaints to the satisfaction of the investor concerned and Strate Supervision.