The object of the approach is to maintain market confidence, reduce risk, protect investors and provide a secure environment to encourage investment.
Regulation, supervision and enforcement include the following:
- Legislative framework and specific regulation governing the activities of Participants.
- Rules and Directives set by Strate.
- Entry criteria.
- Monitoring and supervision by the regulator.
- Disincentive structures.
- Disciplinary procedures.
- On-site visits and audits.
- The role of market discipline, monitoring and reputation.
The Strate regulatory, supervisory and enforcement strategy is about optimising the combination of these components. All components are necessary but none alone is sufficient. The mix will change over time and depending on transgressions, heavier reliance will be placed on particular components than others.
Strate has laid down precise regulatory and legislative requirements that are applied uniformly to all Participants. In terms of this, Strate has set down a clear set of objectives. Each Participant has to demonstrate to Strate how these objectives are to be met by its own internal procedures. The Participant has to meet agreed standards and procedures and, if not, Strate can act in terms of the disciplinary procedures as detailed in the Rules.
“Regulatory intensity” refers to the degree of detail and prescription and the extent to which the behaviour of the regulated person has to be modified by the regulatory agency. The regulation of Participants normally entails medium to high intensity regulation - high in some instances, e.g. acceptance procedure of Participants, with low intensity supervision that escalates whenever needed. This combination proves suitable for the South African market.