Designation of Stockbrokers as Agents Authorized to Pool Funds for Money-Lending Transactions

Regulation Gazette Vol. 351 No. R. 1583 PRETORIA, 14 SEPTEMBER 1994 GOVERNMENT NOTICE SOUTH AFRICAN RESERVE BANK BANKS ACT, 1990 (ACT NO. 94 OF 1990) No. 15976 14 September 1994

DESIGNATION OF STOCKBROKERS AS AGENTS AUTHORIZED TO POOL FUNDS FOR THE PURPOSES OF EFFECTING MONEY-LENDING TRANSACTIONS

Pursuant to sub-paragraph (ii) of the condition to paragraph (ff) of the definition of 'the business of a bank' in section 1 of the Banks Act, 1990 (Act No. 94 of 1990), I, Christo Floris Wiese, Deputy Registrar of Banks, hereby designate any stockbroker as set out in paragraph 1 of the Annexure as an agent who, for the purposes of effecting a money-lending transaction between a lender and a bank as borrower and subject to the conditions set out in paragraph 2 of the Annexure, may pool funds entrusted to such agent by a lender with funds entrusted to such agent by other lenders.

C.F. WIESE, Deputy Registrar of Banks

Definitions ANNEXURE

1. In this Annexure 'the Act' means the Banks Act, 1990 (Act No. 94 of 1990), and, unless the context otherwise indicates, a word or expression to which a meaning has been attached in the Act shall have that meaning and -

2 No. 15976 GOVERNMENT GAZETTE, 14 SEPTEMBER 1994 'bank' includes a mutual bank as defined in section 1 of the Mutual Banks Act, 1993 (Act No. 124 of 1993); 'stock exchange licence' means a licence issued in terms of section 9 of the Stock Exchanges Control Act; 'stockbroker' means a person who is a member of the Johannesburg Stock Exchange and who is in terms of the JSE rules authorized to carry on the business of buying and selling securities for the account of other persons or for his own account, or for the account of other persons and for his own account; 'money broking transaction' means a transaction for the effecting, subject to the provisions of the Act and any other Act of Parliament, of a money-lending transaction between a lender and a bank as borrower through the mediation of a stockbroker who may not act as a principal in the transaction and for the purposes of which transaction the funds to be lent in terms of the money-lending transaction by the lender are entrusted to the stockbroker subject to a written agency contract which shall essentially contain at least the content of the Appendix to this Notice and shall be in the form thereof; 'JSE' means the Johannesburg Stock Exchange as defined herein; 'JSE rules' means rules of the Johannesburg Stock Exchange made in terms of section 12 of the Stock Exchanges Control Act; 'Johannesburg Stock Exchange' means the institution, with premises in the city of Johannesburg, which carries on the business of a stock exchange under that name in terms of a stock exchange licence granted in terms of the Stock Exchanges Control Act; 'committee', in relation to the Johannesburg Stock Exchange, means the committee elected in terms of the rules of the Johannesburg Stock Exchange; 'the Regulations' means the Regulations concerning Banks as promulgated by Government Notice No. R.2509 of 28 December 1993 and amended from time to time; 'fixed deposit' means a non-negotiable deposit at an institution, made for a specific period and at a specific interest rate; 'Stock Exchanges Control Act' means the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985).

GOVERNMENT GAZETTE, 14 SEPTEMBER 1994 No. 15976 3

Conditions 2. The receipt and pooling of funds by stockbrokers in terms of this Notice is subject to the following conditions: (1) No stockbroker shall enter into a money broking transaction without the prior authorization of the JSE committee, such authorization - (a) shall be granted on an annual basis, subject to such conditions as the aforementioned committee may from time to time determine; and (b) may at any time be reviewed, amended or withdrawn by the aforementioned committee. (2) A stockbroker to whom authorization as contemplated in sub-paragraph (1) is granted must at all times comply with the JSE rules, JSE directives and the decisions of the JSE committee, as replaced or amended from time to time, insofar as such rules, directives and decisions are not inconsistent with the provisions of this Notice or the Act. (3) Money for the purposes of a money broking transaction may be received by a stockbroker only - (a) after the agency contract referred to in the definition of 'money broking transaction' in paragraph 1 has been signed by both parties to the contract; or (b) in the case where the transaction is concluded by facsimile, after a facsimile copy of the original agency contract, duly signed by the lender, has been signed by the stockbroker: Provided that the original agency contract, duly signed by the lender, must be supplied to the stockbroker and duly signed by him within 21 days after receiving the money as contemplated in this sub-paragraph. (4) The signed original agency contract must be retained by the stockbroker, and a signed copy thereof must be sent to the lender. (5) In the case where the relevant stockbroker - (a) is a natural person, the agency contract must be signed by such natural person; (b) is a natural person in partnership with one or more other stockbrokers, the agency contract must be signed by a partner of such partnership; (c) is a company, the agency contract must be signed by a director of such company, and the name of the person(s) authorized to from time to time sign such agency contracts must be communicated to the Director of Supervision of the JSE. (6) A stockbroker conducting money broking transactions must - (a) deposit funds pooled in terms of this Notice in a call or fixed deposit account at a bank; (b) operate a separate bank account for all and exclusively for money broking transactions, which account - (i) must be reconciled with bank statements daily; (ii) must be brought to zero daily, that is, surplus funds must be automatically transferred at the end of the day to a lender call account; (c) monthly send to lenders a statement produced on the 'Broker Deal Accounting' system (hereinafter referred to as the BDA system) which with regard to the previous month reflects the following - (i) amounts invested and withdrawn; (ii) the dates and terms of investments, including interest rates and payment details; (iii) the name of the bank with which the money-lending transaction was concluded; (iv) the nature of any assets held in safe custody on behalf of the lender and the place where the assets are held; and (v) a declaration to the effect that fair and reasonable remuneration was charged, or otherwise the actual remuneration charged by the agent to the lender, expressed as - (aa) the actual rand amount; or (bb) a percentage; (d) notwithstanding the provisions of sub-paragraph (6)(c), in those cases where - (i) the account is opened at a bank in the name of the lender; and (ii) the bank monthly sends statements directly to the lender and such statement, mutatis mutandis, reflects the details specified in sub-paragraph (6)(c)(i), (ii), (iii) and (iv); and (iii) the capital of the lender's money-lending transaction was held at the same bank during the previous month, the BDA system statement referred to in sub-paragraph (6)(c) need only reflect the following - (aa) the lender's closing balance at the bank as at the date of that statement; (bb) a declaration to the effect that the investment was held at the bank for the duration of that month; (cc) a declaration that the information required in terms of sub-paragraph (6)(c)(i), (ii), (iii) and (iv) will be sent directly to the lender by the bank; and (dd) the information required in sub-paragraph (6)(c)(v). (7) A stockbroker conducting money broking transactions must provide the Director of Supervision of the JSE with - (a) a list of lender codes and any changes to such list; (b) a daily report reconciling lender allocations with bank balances and a report of backdated allocations; and (c) in the case of the liquidation of a bank or where a bank is placed under curatorship, a list of lender deposits at such bank as soon as notice of the liquidation or curatorship is received. (8) A stockbroker conducting money broking transactions must - (a) in the case where a brokerage firm uses an independent computer system, report on a daily basis details of reconciliations of unmatched and unidentified deposits and/or allocations to the BDA system; (b) not permit a lender to withdraw a fixed deposit prematurely without the written consent of the bank at which the deposit is placed and may not replace one lender's fixed deposit with that of another to facilitate early repayment; (c) ensure that the term of the deposit at the bank corresponds with the term granted to the lender; (d) ensure that all transactions for the benefit of lenders, including the subsequent movement of deposits between banks, are confirmed in writing by or to the bank or the stockbroker directly to such lender unless the stockbroker is instructed in the agency contract referred to in the definition of 'money broking transaction' in paragraph 1 not to do so; (e) ensure that all transactions with a bank are confirmed by the stockbroker to the bank, in which confirmation it must be specified that the stockbroker acts as agent for the lender; (f) keep a register, in a form prescribed by the committee, of all agency contracts concluded by him in terms of the provisions of this Annexure; (g) deposit assets, which include deposit certificates, receipts and other title documents assigned to and identified as belonging to a lender, in a safe custody account at a bank in accordance with the provisions of JSE rule numbers 5.260, 5.270.4, 5.270.8 and 5.270.9 mutatis mutandis in the case of assets which are not securities; (h) maintain a safe custody ledger of the assets held from time to time in terms of item (g) above, in which ledger full details of any change in the assets held for the benefit of a lender must be recorded immediately; (i) monthly reconcile the assets with the safe custody ledger and the bank records and, as proof that the assets are thus reconciled, submit to the Director of Supervision of the JSE a properly signed certificate of securities, which certificate must be submitted to the committee on the last working day of the week following the BDA month-end to which the certificate relates. (9) The certificate referred to in sub-paragraph (8)(i) must be signed, in the case where the stockbroker - (a) is a natural person, by that person and by a senior official of that person; (b) is a natural person in partnership with one or more other stockbrokers, by any two partners or by any partner and by a senior official of such partnership; (c) is a company, by any two persons or by any director and by a senior official of such company: Provided that, notwithstanding the provisions of this sub-paragraph, the certificate may be signed by such other persons as the committee may from time to time approve on an annual basis. (10) Every cheque or electronic fund transfer arising from a money broking transaction, any letters from the stockbroker to banks confirming movements of deposits between banks, and any requests for the withdrawal of funds from a bank must be signed by the stockbroker. (11) The provisions of sub-paragraph (9) shall apply mutatis mutandis with regard to the authorization to sign documents to comply with the provisions of sub-paragraph (10). (12) A stockbroker who records his money broking transactions through an independent computer system must ensure - (a) that the entire system is backed up at least once daily; (b) that backup disks are safely stored at another premises.

APPENDIX FORM OF AGENCY AGREEMENT REGARDING A MONEY BROKING TRANSACTION

Definitions In this agreement:

• means the minimum requirements of the committee and the Banks Act, 1990, as amended, to which additional conditions as agreed between the lender and the brokerage firm may be added provided that such additional conditions do not detract from the aforementioned minimum requirements between ('Lender') and ('Agent') 1.1 words implying one gender include the other gender; 1.2 the singular includes the plural and vice versa; 1.3 'agent' means a stockbroker who contracts money broking transactions; 1.4 'bank' - (a) means any institution registered in terms of the Banks Act, 1990 (Act No. 94 of 1990 - hereinafter referred to as 'the Banks Act'); or (b) means any mutual bank registered in terms of the Mutual Banks Act, 1993 (Act No. 124 of 1993); 1.5 'committee', in relation to the Johannesburg Stock Exchange, means the committee elected in terms of the rules of the Johannesburg Stock Exchange; 1.6 'money broking transaction' means the effecting, subject to the provisions of paragraph (ff) of the definition of 'the business of a bank' in section 1 of the Banks Act, of a money-lending transaction directly between a lender and a bank as borrower - (a) through the mediation of a stockbroker who does not act as a principal in the transaction; (b) where the funds to be lent in terms of the money-lending transaction by the Lender are entrusted to the stockbroker subject to a written agency contract which shall essentially contain at least the content of this Agreement and shall be in the form thereof; (c) the subsequent pooling of the funds entrusted to such stockbroker by such lender with funds entrusted to such stockbroker by other lenders; and (d) the depositing of such pooled funds in a call or fixed deposit account at a bank; (e) in accordance with, and subject to, provisions by way of Notice promulgated in the Government Gazette; 1.7 unless the context otherwise indicates, words and expressions defined in the Stock Exchanges Control Act, 1985 ('the Act'), the Rules ('Rules') of the Johannesburg Stock Exchange ('JSE') and the Banks Act shall have the meaning attributed to them therein, and related expressions must be construed accordingly.

Appointment of Agent The Lender hereby appoints the Agent as the Lender's agent with full authority to conclude money broking transactions on behalf of the Lender.

Acknowledgements and Undertakings by the Agent 3.1 The Agent acknowledges that: 3.1.1 this contract may be terminated at any time at office closing on the day of receipt of a notice sent by the Lender to the Agent or by the Agent to the Lender, and the Agent must immediately notify all banks with which the Agent has concluded contracts on behalf of the Lender as to which contracts remain outstanding; 3.1.2 this contract is ipso facto terminated in any of the following cases: 3.1.2.1 upon the death of the Lender or the Agent; 3.1.2.2 upon the sequestration, provisional or final, of the estate of the Agent if a natural person or a partnership of natural persons; 3.1.2.3 upon the dissolution, for other reasons, of a partnership which is the Agent provided that if, after dissolution, the business of the Agent is continued by a new partnership consisting of inter alia not less than 50 percent of the partners of the dissolved partnership, this subclause shall not apply; 3.1.2.4 in the case where the agent is a corporation, upon the granting of a provisional or final order of liquidation of the corporation; 3.1.2.5 if the Agent becomes a defaulter in terms of the provisions of Article 8 of the Rules. 3.2 In the case where the contract is terminated for any of the reasons set out in 3.1.1 or 3.1.2 (other than upon the death of the Lender), the committee is entitled to apply to the money broking transactions of the Agent, strictly, such provisions of the Rules as the committee may reasonably or desirably deem fit, with regard to the money broking transaction concluded by the Agent and still outstanding. 3.3 The Agent undertakes: 3.3.1 to always act with utmost good faith towards the Lender. 3.3.2 to monthly, retrospectively, send or have sent to the Lender a statement which, with regard to the previous month, reflects the following: 3.3.2.1 amounts invested and withdrawn; 3.3.2.2 the dates and terms of investments, including interest rates and payment details; 3.3.2.3 the name of the bank with which the money-lending transaction was concluded; 3.3.2.4 the nature of any assets held in safe custody on behalf of the Lender and the place where the assets are held; and 3.3.2.5 the remuneration charged by the Agent to the Lender, in the form of either the actual rand amount or the percentage; or that fair and reasonable remuneration was charged; 3.3.3 to deposit in a call account at a bank any funds of the Lender held by the Agent which are not, in terms hereof, committed at the time of the Agent's bank's office closing for the Lender. The form of the agency agreement which the Agent decides to submit to the Lender should only contain that version of 3.3.2.5 which the Agent wishes to include in the Agency Agreement.

3.4 Otherwise, where the institution will send a statement directly to the Lender, the statement referred to in 3.3.2 need only reflect the following: 3.4.1 the Lender's closing balance at the institution as at the date of that statement; 3.4.2 a declaration to the effect that the investment was held at the institution for the duration of that month; and 3.4.3 a declaration that the institution will send the information required in terms of 3.3.2.1 to 3.3.2.5 directly to the Lender.

4. Acknowledgements and Undertakings by the Lender 4.1 The Lender acknowledges that: 4.1.1 the Agent acts as his agent; 4.1.2 he, except insofar as he may have a legal right of recourse against the Agent, accepts all risks associated with the administration by the Agent of the funds entrusted to him by the Lender, as well as the responsibility to ensure that the Agent executes his instructions as recorded in this agency agreement and any amendments thereto as agreed in writing by the parties hereto; 4.1.3 neither the JSE nor the Agent shall be held liable in any way for any obligations of the bank with which the Agent concluded a money broking transaction on behalf of the Lender; and 4.1.4 he is aware that the Agent, for the purposes of a money broking transaction, may pool the Lender's funds with the funds of other Lenders represented by the Agent. 4.2 The Lender undertakes that: 4.2.1 without the prior written consent of the bank with which the Agent concluded a money broking transaction, the Lender shall not withdraw a fixed deposit from such bank before the expiry of the fixed period or final date specified in the deposit; 4.2.2 besides the Agent's undertaking in terms of 3.3.2, he requires/he does not require that the Agent must immediately notify him in writing of the conclusion with him of a money broking transaction and any changes to the following details in the money broking transactions concluded by the Agent on behalf of the Lender, namely - 4.2.2.1 a change of the bank to which the Lender's money is lent 4.2.2.2 a change in the interest rate payable by the bank as borrower on the Lender's loan 4.2.2.3 details of deposits and withdrawals made by the Agent on behalf of the Lender; *(Note: delete what is not applicable) **(Note: mark the change of which the Lender must be notified) 4.2.3 he will carefully read through all statements to be delivered to him in terms of 3.3.2 above and will consider them and will immediately notify the Agent in writing of any money broking transaction from which he wishes to withdraw or which he wishes to terminate as soon as the Agent can legally effect such withdrawal or termination; and 4.2.4 he will immediately notify the Agent in writing if anything in any statement referred to in 4.2.3 is not understood by him or if he believes it to be incorrect and will furthermore notify the Agent accordingly if he does not receive a statement for any month