GETTING THE DEAL THROUGH – SECURITIES FINANCE 2014

By David Yuill Monday, May 12, 2014
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What are the relevant statutes and regulations governing securities offerings? Which regulatory authority is primarily responsible for the administration of those rules?

The relevant statutes governing securities offerings are the Companies Act, 2008 (the Companies Act), the Collective Investment Schemes Control Act, 2002 (CISCA), the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act), and the Banks Act, 1990 (Banks Act). This legislation applies to listed and unlisted securities. A new act, the Financial Markets Act, 2012 (Financial Markets Act) was promulgated in 2013, repealing and replacing the Securities Services Act, 2004 in its entirety.

Regulations

There is one licensed exchange in South Africa the Johannesburg Stock Exchange (JSE) for the listing of equity and debt securities. The JSE has two boards – a main board and an alternative exchange (AltX) for small and medium-sized companies. Previously, debt securities were listed on and regulated by the Bond Exchange of South Africa (BESA), which was a licensed exchange separate from the JSE. However, BESA became a wholly owned subsidiary of the JSE in June 2009. The listing of debt securities is now regulated by the JSE in terms of the Debt Listings Requirements. The Financial Markets Act consolidates the law relating to the regulation and control of, inter alia, exchanges and securities trading, central securities depositories (relevant for dematerialised shares), the custody and administration of securities, market abuse matters, restrictions on who may market securities and ancillary matters.

The listing of equity and debt securities on the JSE is subject to compliance with the Listings Requirements of the JSE (the Listings Requirements), the Debt Listings Requirements and JSE approval. The JSE must approve all circulars prior to such documents being sent to shareholders. Sponsors must approve all announcements to be made prior to publication except for those containing JSE regulated timetables, which aspect of the announcement will also require JSE approval.

The issue of debt securities can be construed as taking deposits from the general public, which activity, in terms of the Banks Act, requires a banking licence unless the debt securities are issued in accordance with the provisions of the Commercial Paper Regulations (CP Regulations) or the Securitisation Regulations published in terms of the Banks Act, in which case the issuer is not required to have a banking licence. Exchange controls restrict how non-South African companies raise capital in South Africa (inward listings) and how South African companies raise capital abroad.

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