Financial Sector Regulation Bill Sent to NCOP

National Assembly

The Financial Sector Regulation Bill has been passed by the National Assembly (NA) and sent to the National Council of Provinces (NCOP) for concurrence.

The bill was tabled in parliament in October 2015.

It aims to put a twin peaks model of financial sector regulation in place in South Africa.

The twin peaks model will see the Financial Services Board overseeing market conduct while the Reserve Bank will take responsibility for prudential regulation.

The proposed legislation calls on the Reserve Bank to “promote and maintain financial stability within an agreed policy framework”.

The bill also wants a Council of Financial Regulators to be set up to ensure cooperation between the twin peaks regulators and other financial sector-related regulators.

A Financial Services Tribunal is also on the cards to deal with appeals.

The bill will put a single regulatory system in place thereby significantly reducing the potential for regulatory arbitrage or forum shopping.

Some of the amendments introduced by the standing committee on finance include amendments to clause 39 on removal of chief executive officer, clause 49 on disclosure of interests, clause 61 on commissioner and deputy commissioners, clause 65 on removal of office, clause 72 on disclosure of interests and clause 273 on false or misleading information.

The bill will now be processed by the select committee on finance.

The Finance Bill and the Adjustments Appropriation Bill were also passed by the NA and sent for concurrence.

Meanwhile, national treasury, the Financial Intelligence Centre and the parliamentary legal advisor briefed the standing committee on finance on the Financial Intelligence Centre Amendment Bill, recently referred back to parliament by president Zuma.
In a recent statement, the presidency confirmed that the bill had been returned to parliament due to concerns held by president Zuma that certain provisions of the bill do not pass constitutional muster.

In particular, the president raised concern with the provisions relating to warrantless searches.

The president holds the view that these provisions “fall short of the constitutional standard required for the provision not to unjustifiably limit the right to privacy”.

The parliamentary legal advisor, Adv Frank Jenkins, emphasised that the committee must confine itself to dealing with the president’s reservations when processing the president’s concerns.

Treasury indicated that it is discussing the issue of warrantless searches with its legal counsel.

Treasury also pointed out that warrantless searches are a critical regulatory tool to ensure compliance with the bill once it is enacted.

South Africa must also report to the Financial Action Task Force (FATF) in February 2017 on implementation of the bill. There is now a risk, given the delay in the bill, that the FATF may take steps against south Africa such as issuing a statement “expressing FATF’s concerns at SA’s continued failure to address its deficiencies, implying that SA is a non-compliant and risky jurisdiction with AML/CFT deficiencies”.

In a statement, the standing committee on finance announced that it will be seeking independent advice from senior counsel on the matter.

The committee chairperson, Yunus Carrim, also stressed that the matter at hand was not a policy matter but rather a constitutional matter that will have to be “primarily decided by lawyers”.

“If the lawyers Parliament consults can’t agree, we can maybe delete the provision. But it’s also possible that the Constitutional Court might have to decide on this,” he said.

The committee also plans to hold public hearings on the constitutionality of warrantless searches in late January 2017.

Sabinet Cape Town Office

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