Sibos 2014 Update

The 34th SWIFT Sibos seminar took place at the Boston Convention & Exhibition Centre from 29 September to 2 October 2014.

 

The annual conference, exhibition and networking event for the financial industry discussed key themes from regulation and international standards to new infrastructures and technology, as well as a wide range of topical issues, such as Target2-Securities, cross-border payment/settlement, cybercrime and Kenya’s mobile money revolution.

 

Sibos 2015 takes place at the Sands Expo and Convention Centre, Marina Bay Sands, Singapore, from 12 to 15 October 2015. The three destinations following Sibos 2015 have also been chosen, with Geneva, Toronto and Sydney all due to host the event.

 

 

Save the Date: STRATE Supervision Conference

During 2012, STRATE Supervision (the independent operational unit that supervises Strate’s CSD Participants) hosted its second supervision and compliance conference. The aim of the conference was to educate and highlight the various compliance developments and current issues within the securities industry. The key theme of the conference held during 2012 focused on the impact of the 2008 financial crisis and how functions such as risk management are essential in detecting, managing, and in some instances, preventing the financial collapse of entities and/or financial markets. 

 

In light of the success of the 2012 conference, STRATE Supervision will be hosting its third conference on 12 November 2014 at the Wanderers Club. In keeping with the risk management theme, and specifically the need to develop mechanisms for greater levels of transparency, the 2014 conference will focus on the topics of Client Due Diligence and Know Your Client. In the Securities industry, the CPSS-IOSCO Principle 19 has drawn attention to these concepts in a much wider realm than simply banking and cash processing. Principle 19 states that, “An FMI should, to the extent practicably, understand, and manage the risk to it arising from tiered participation arrangements.” 

 

The issue of transparency is not a novel concept when it comes to Securities transactions and custodial functions. More importantly, the call for higher levels of transparency is often hindered by the use of the omnibus account structures. Whilst more and more regulators globally are paying special attention to, for example Principle 19, the Wolfsberg principles, FINCEN under the US Treasury and many other guidelines, often regulated entities do not fully understand the impact of the risks an entity can be exposed to by not just its direct Clients but by the Clients of those Clients. As such, the crucial question being asked now is “Do you know who your Clients’ Clients are?”

 

For more information about the 2014 conference please contact Natalie Modley at nataliem@strate.co.za or +2711 759-5392.

 

 

 

Strate Exams receive International Accreditation

Strate Training, in partnership with the South African Institute of Financial Markets (SAIFM), offers on-line examinations using SAIFM examination facilities for individuals interested in becoming accredited as Strate Compliance Officers in the equities, bonds and/or the money market securities environment.

 

During September, the UK-based Chartered Institute for Securities and Investment (CISI) recognised Strate’s three-exam qualification as meeting its requirements for a local regulation module for the CISI Investment Operations Certificate (IOC). While the IOC is made up of three modules, holders of Strate’s qualifications will  only need to take two modules.

 

 

The IOC is the CISI’s most established qualification and is taken by practitioners globally to enhance their knowledge and skills of the administration and operational areas of the financial services industry. 

 

The qualification is increasingly used as a benchmarking tool by major banks and investment firms to ensure that employees possess practical knowledge that can be immediately applied to business activities.

 

“This is a great achievement for Strate and for every individual that holds an accredited Strate Compliance Officer certificate. Those who have written and passed the Strate exams, or are planning to do so, can confidently enjoy both the international recognition and local accreditation of the Strate exams,” says Leigh Bevis, Strate’s Head of Stakeholder Relations.

 

Strate Training is already an Approved Training Provider of the Finance and Accounting Services Sector Education and Training (FASSET), the Sector Education and Training Authority for Finance, Accounting, Management Consulting and other Financial Services.

 

“This international recognition confirms that the Strate exams possess world-class knowledge that meets the international standards required by financial markets,” concludes Bevis.
 

 

 

A Piece of Robben Island

Nine months following the passing of Nelson Mandela’s passing, Strate paid tribute to his legacy by supporting the Robben Island Art Co & Trust (RIACT) RIACT is an initiative that allows both individuals and corporates to purchase an authentic art piece – a painting of Nelson Mandela called “Day Off” – that includes a section of the original prison fence.

 

The proceeds of which then go towards community upliftment and job creation. Robben Island was the maximum-security prison where Nelson Mandela was held for nearly 2 decades. He was released from prison in 1990 to become South Africa’s president in 1994. Robben Island is now a museum and hosts approximately 1 500 visitors every day.

 

According to the RIACT, apart from creating employment, its project reminds South Africans of what the country achieved in moving peacefully from apartheid to democracy. “One of the primary goals of RIACT is to ensure that the original fence from Robben Island comes full circle from holding people captive, to releasing people from the prison of poverty.”

 

The art compliments the “Brotherhood of Hope painting”, which includes the likes of Nelson Mandela and US President Barack Obama, which was donated to Strate by John Pickering, an IT Consultant from Incentage. Incentage provides messaging solutions for the financial services industry across the globe. 

 

 

 

South Africa’s Financial Market Development Continues to Shine

The 2014-2015 Global Competitiveness Index (GCI) report published by the World Economic Forum (WEF) continues to show South Africa placed amongst the top ten countries globally in terms of financial market development.

 

After studying 144 countries, South Africa was ranked 7th in terms of financial market development. Hong Kong and Singapore maintained the first and second ranks respectively, while New Zealand moved up a spot to third place.

 

For South Africa, the key contributors to this pillar were its performance in terms of the regulation of its securities exchange (ranked 1st), financing through the local equity market (ranked 3rd), its availability of financial services and the soundness of banks (both ranked 6th respectively). Notably, the regulation of securities exchanges rank maintained its first place position for the fourth consecutive year. The Financial Services Board (FSB) regulates South Africa’s securities exchange, the JSE, as well as Strate.

 

In a statement issued to the media, the FSB said, “This is a well-earned accolade which demonstrates the FSB’s consistent, efficient and robust oversight of regulation within its mandate…” 

 

Monica Singer says South Africa’s story paints a picture of success. “People can feel safe and confident when they look at investing in South African securities. Our market is well-regulated and is an attractive investment destination both locally and internationally.” 

 

She says that market initiatives are underway to further improve the country’s profile and continue to align it to international recommendations and standards, such as the investment in a trade repository for over-the-counter derivatives, collateral management infrastructure as well as a move to shorter settlement cycle for equities. 

 

In the overall GCI country rating, South Africa was ranked at 56 out of 144 countries. The GCI takes into account 12 pillars or drivers: institutions, infrastructure, macro-economic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. 

 

South Africa is the second highest ranked sub-Saharan economy after Mauritius. 

 

Introduction to Withholding Tax on Interest

Interest payments in foreign jurisdictions are often subject to a withholding tax on payments to non-residents.

 

This implies that non-residents would receive interest payments net of tax. In accordance with the Taxation Laws Amendment Act No. 31 of 2013, the South African Revenue Service (SARS) has introduced a withholding tax on interest at a rate of 15%, effective 1 January 2015, as per section 50(A) to 50(H) of the Income Tax Act. The legislation aims to align South African tax practices with international norms.

 

The legislation impacts interest payments that are either paid by South African companies/persons to non-residents, or interest received or accrued to non-residents from a source within South Africa. The primary purpose of the legislation is to subject interest payments due to non-residents from a South African source to  a final tax. Section 50(D) of the Income Tax Act provides certain exemptions from withholding tax on interest. If any of these exemptions apply, such interest payments are not subject to a final tax, but are subject to normal income tax consequences.

 

While the beneficial owners are taxed, the companies paying the interest (or more practically the withholding agents as the Service Providers) are required to withhold and pay the tax to SARS on behalf of the ultimate recipients. The taxes withheld are payable to SARS on the last day of the month (e.g. May 2014),  following the month during which the interest is paid (e.g. April 2014).

 

Some foreign investors will be exempt from withholding tax on interest and some may be eligible for a reduced tax rate. This is dependent on the Double Tax Agreements (DTAs) between South Africa and the foreign jurisdiction.

 

For more information on withholding tax on interest, please contact:

 

Gregory Naicker                                                  Ridhwaan Williams
+27(0)11 759 5371                                               +27(0)11 759 5446
gregoryn@strate.co.za                                        ridhwaanw@strate.co.za

Save the Date – 2015 WFC Conference

The conference of the World’s Central Securities Depositories (WFC 2015) will be held in Cancun, Mexico, from 19 – 22 May 2015.

 

The 13th edition of this biennial event will be hosted by Indeval, the national depository of Mexico, in conjunction with the Americas’ Central Securities Depositories Association.

 

World Forum of CSDs Update on Initiatives

During April 2011, the five regional CSD associations announced the formation of the World Forum of CSDs (WFC) in order to further enhance inter-association communications. Since then, significant progress has been made under the various WFC initiatives to meet the objectives of the industry forum.

 

The WFC formed a Task Force in May 2012 to look at the possibility of devising a harmonised disclosure-reporting format for the CSD industry. This would enable CSDs globally to efficiently and comprehensively respond to the multiple assessments and questionnaires that they typically complete annually, via a single consolidated source, since these questionnaires contain substantially overlapping information and reporting requirements.

 

Included in the initial phase of this initiative were the Association of Global Custodians (AGC) questionnaire and the CPSS-IOSCO Disclosure Framework. While the Task Force fully recognised the differing scope and objectives of these two questionnaires, the preliminary work that they carried out revealed that many of the questions cover similar ground. Given the considerable resources that CSDs dedicate to these disclosures, the potential to consolidate the AGC and CPSS-IOSCO Disclosure Framework requirements into a Single Disclosure adds considerable benefits for CSDs (simplified and more efficient data collection process) and regulators (enhanced level of disclosure).

 

Over recent months, the Task Force has spent substantial time mapping the CPSS-IOSCO Disclosure Framework (using key elements and Assessment Methodology questions) against the AGC Questionnaire, with tangible and successful results. This work was formally presented to CPSS-IOSCO Drafting Committee representative, Daniela Russo, and AGC representatives, Rudy Gandenz and Ulf Noren, at the WFC Board Meeting on 20 May 2014.

 

Moving forward, the Task Force will look to procure a suitable online tool for the WFC’s Single Disclosure Questionnaire project. It aims to implement the solution in 2015.

 

 

Feedback from the ISSA Symposium

During May 2014, Strate attended the 17th biennial International Securities Services Association (ISSA) Symposium, the agenda of which focused on how the value chain has been responding to the regulatory challenges and the implications for the industry.

 

Some 80 senior delegates of custodian banks and financial market infrastructures took part in the event, which was held at the Wolfsberg Conference Centre in Ermatingen, Switzerland, with a total of 48 institutions from 26 countries present. Some of the key discussions that took place included the:

 

  • Adaptation of the business model to compliance demands;
  • Practical application of technology to solve regulatory challenges;
  • Infrastructural regulatory challenges (CPSS-IOSCO Principles 14 and 19); and
  • Collateral Management.

 

A detailed account of these discussions can be viewed by clicking here.

 
Moving forward, Strate will work with the ISSA to provide input on the topics discussed, either directly to the ISSA or through its association with the World Forum of CSDs (WFC).

 

 

 

Strate Maintains B-BBEE Rating against the New Financial Sector Charter

Strate is pleased to have maintained its 2014 Broad-Based Black Economic Empowerment (B-BBEE) after it was measured against the new Financial Sector Charter (FSC).

 

In the 2014 B-BBEE Audit, Strate has been categorised as a Level 3 Contributor, with an overall score of 80.35%, providing 137.5% as Value-Adding Supplier. The score was based on Strate’s 2013 Audited Financial Statements. During this year’s B-BBEE Audit, Strate achieved the maximum Department of Trade and Industry targets on the FSC for Enterprise Development and Socio-Economic Development, elements directly within Strate’s control.

 

To view its new B-BBEE certificate, click here.