World-class standards of regulation and governance
Supporting financial market stability
As a trusted financial market infrastructure (FMI) that delivers digital solutions to the South African financial market, Strate operates within a sound regulatory framework.
Our services, including as a central securities depository, associated clearing house and a Payment Clearing House System Operator, are provided in terms of the:
- Companies Act (2008)
- Financial Markets Act (2012)
- Financial Sector Regulation Act (2017)
Strate is overseen by the:
Financial Sector Conduct Authority
South African Reserve Bank’s (SARB) Prudential Authority
SARB’s National Payment System Oversight and Supervision Department
As a financial market infrastructure, we adhere to the principles enshrined in local and international best practice including the Committee on Payment and Market Infrastructures and International Organisation of Securities Commissions (CPMI-IOSCO).
Ensuring markets are fair, efficient and transparent
Strate is also mandated by section 30 of the Financial Markets Act (2012) to act as a self-regulatory organisation (SRO). As an SRO, Strate contributes to financial market stability by establishing, maintaining and monitoring regulatory and governance standards that uphold confidence in the market.
Under a self-regulatory model, the licensed financial market infrastructure, rather than the government regulator, is responsible for directly regulating and supervising the entities in its ecosystem.
This is achieved through two key mechanisms:
- Strate Rules: establish the principles of market conduct
- Strate Directives: set out the details of day-to-day activities
In terms of the FMA mandate, Strate must supervise, regulate and enforce Central Securities Depository (CSD) Participants’ compliance with the Act, Strate Directives and Strate Rules.
The objectives of the Financial Markets Act (FMA) are Strate’s guiding principles.
FMA objectives
Increase market efficiencies and fairness
Protect regulated persons, clients and investors
Reduce systemic risk
Increase confidence in SA markets
Enhance market transparency
Support market interoperability and competitiveness
Upholding the highest standards of governance
To operate effectively as South Africa’s principal central securities depository and a financial market infrastructure, Strate works within a framework which comprises several Board committees that guide decision-making and ensure Strate fulfils its mandate.
The Regulatory and Supervisory Committee assists the Strate Board to discharge its regulatory, supervisory, investigative and enforcement obligations in terms of the FMA and the Strate Rules and Strate Directives.
The Committee is supported operationally by Strate’s Supervision division and Legal, Risk and Compliance division.
Supervision
Strate Supervision – responsible for the execution of the supervisory and enforcement obligations of Strate in terms of the FMA.
Strate’s Regulatory and Supervisory Committee
Upholding market confidence
Strate Supervision is an independent division within Strate responsible for monitoring central securities depository (CSD) Participants who are licensed to operate in the Strate environment.
Operating as a self-regulatory organisation (SRO), Strate Supervision upholds market confidence through the rigorous enforcement of Strate Rules and Directives and the Financial Markets Act 19 of 2012 (FMA).
This responsibility includes:
- Recommending the approval of new market participants to the Strate Board
- Monitoring the operations, systems and conduct of existing participants
- Monitoring compliance with the FMA, Strate Rules and Directives and, where breaches are identified, issuing fines to participants or instituting disciplinary action (where required)
Our supervisory approach
Strate Supervision assesses CSD Participants’ compliance levels through comprehensive risk management frameworks and supervisory tools. These supervisory interventions aim to identify risks and exposures that CSD Participants may introduce through their conduct.
Our supervisory approach includes:
- Accredited compliance officers who are a key link between Strate Supervision and participants
- A risk-based participant monitoring model (PMM) to evaluate external and internal information, including Strate settlements systems data
- On-site visits
- Desktop reviews
In instances where Strate identifies non-compliance, the Regulatory and Supervisory Committee executes enforcement decisions and Strate Supervision fulfils them.
Where appropriate, Strate levies fines against CSD Participants. Funds collected through the imposition of monetary fines are allocated to a Special Purpose Reserve Fund (SPRF) and are not used to subsidise the costs or operational functions of Strate or Strate Supervision.
The SPRF is used to fund or subsidise special projects or market training initiatives and any expenditure requires approval from the Strate Audit and Risk Committee to ensure that it is used for the benefit of the financial markets.
Managing conflicts of interest
The FMA obliges Strate to effectively manage perceived or actual conflicts of interest that may arise between the regulatory function and any commercial services the company offers.
To ensure independence of oversight, Strate Supervision maintains direct reporting lines to an independent Regulatory and Supervisory Committee, distinct from its relationship with Strate as the CSD.
Strate has established appropriate measures to manage conflicts of interest between Strate’s commercial CSD functions and its SRO functions, and rigorously adheres to them.
Regulated entities
Regulated entities – a detailed list of regulated entities clearly delineating between a Participant and a Nominee (further, a Strate or FSCA approved nominee). The list should clearly indicate the asset class that each Participant and nominee operates in and the status.
Strate to provide this list.
Strate supervises CSD Participants, who the FMA defines as “a person authorised by a licensed central securities depository to perform custody and administration services or settlement services or both in terms of the central securities depository rules and includes an external participant where appropriate”.
Rules and Directives
The Regulatory and Supervisory Committee regularly considers whether the Strate Rules and Strate Directives provide an adequate framework for regulating and supervising CSD Participants.
The FMA establishes a framework for market regulation, while market infrastructures such as Strate develop the detailed provisions within the Rules and Directives.
