The Minister of Finance has published draft regulations which propose to designate the “provision of a benchmark” as a financial service in accordance with the Financial Sector Regulation Act (FSR Act) and to specify that the Financial Sector Conduct Authority (FSCA) is the responsible authority for the regulation, supervision and oversight of the financial service.
The provision of a benchmark is not currently regulated in terms of any financial sector law in South Africa. Concerns about the integrity and reliability of benchmarks have brought about regulatory reform initiatives internationally which includes, among others, the EU benchmark regulations (BMR). In terms of the BMR, which came into operation on 1 January 2018, non-EU benchmarks may only be used in the EU if the benchmark is qualified under an equivalent third-country regime. Benchmark administrators domiciled in non-EU jurisdictions must be compliant with the BMR by 1 January 2022, which means that for South Africa to qualify as an equivalent third-country regime, a regulatory framework for the provision of benchmarks must be established.
The draft Regulations are expected to enable the FSCA to appropriately supervise and regulate the provision of benchmarks, with a regulatory framework that is in line with international standards. Further, the intention is not to directly regulate the South African Reserve Bank (SARB) in relation to its role as benchmark administrator of two key benchmarks but is intended that the regulation would focus on other benchmarks used in the South African markets.
Written comments on the draft amendment to the Financial Sector Regulations should be submitted to commentdraftlegislation@treasury.gov.za by close of business on 13 October 2021. You can email Jeannine Bednar-Giyose at Jeannine.Bednar-Giyosi@treasury.co.za for any clarification questions.
The draft regulations will come into effect on the date of publication in the Gazette.
To read the related documents, click on the links below: