Investor Protection in a securities market is achieved through fairness, honesty and security. These concepts are used internationally and embrace a wide spectrum of measures aimed at giving meaningful protection to the investors by safeguarding their interests.
There is extensive financial protection in place for losses incurred by investors and stockbroking firms as a consequence of fraud, theft or default. Whilst the JSE Guarantee Fund ("the Fund") serves to protect investors, the fidelity insurance policy ("the insurance policy") serves as a front-line protection for member firms particularly in so far as employee fidelity is concerned.
The insurance policy also provides for protection to members having dealt in good faith with tainted securities.
This amended Act now includes wider cover by the Fund (which has assets of R83 million) for deals transacted with a foreign counterparty and principal to principal trades. The Fund's rules will also be revised significantly, in particular the rules relating to a member's excussion. Immediately following the default of a member, the Fund can process a client's claim and pay out that claim, should it be deemed to qualify. The Fund would then claim against the estate. Previously the Fund could not pay out a claim until the defaulting member's estate has been wound up.
The insurance policy was renewed on 1 July 1995 and the cover has been increased from R 250 million to R 350 million.
Apart from the measures that have been described above, the following additional achievements are noteworthy:
- the amended Act now stipulates that all client funds must be totally separated from a member's funds in a trust account. This segregation of funds significantly improves the client's protection should a member default as the liquidator of the defaulting member is unable to have access to any client's monies; and
- a Bill to provide for the protection of purchasers of securities awaits promulgation by Parliament. This Bill will offer improved protection to the investor against stolen scrip.
Whilst every care has been taken in the preparation of this article, the JSE is not responsible for any errors or omissions contained therein. Readers should therefore study the original Act, rules and other documents referred to or consult with the JSE before acting on any information supplied.
For further information kindly contact: JSE Public Relations Department, PO Box 1174, Johannesburg 2000. Tel: 377 2200; Fax: 834 7402; or do a text search "Johannesburg Stock Exchange" and "Business Monitor".