Regulatory Alerts2018-04-01
Circular F.S. 26: Transactions in Gilt- and Semi-Gilt-Edged Securities
The Financial Institutions Office has issued Circular F.S. 26 to prohibit financial institution employees from engaging in unrecorded personal trading and accepting undisclosed commissions for sharing confidential market information. The regulator classifies these activities as highly irregular and potentially fraudulent due to the inherent conflict of interest and breach of fiduciary duty to employers. All friendly societies must immediately audit their staff for involvement in these practices and submit a written report by 15 August 1983 detailing any occurrences, discontinuation status, and specific transaction records, accompanied by an auditor-signed acknowledgement form.
FINANCIAL INSTITUTIONS OFFICE Private Bag X238 PRETORIA 0001
13 July 1983
CIRCULAR F.S. 26 (To all friendly societies)
TRANSACTIONS IN GILT- AND SEMI-GILT-EDGED SECURITIES
-
Inquiries made by this Office have brought to light a practice whereby certain dealers in gilt- and semi-gilt-edged securities in the employ of financial institutions receive for own account a reward from certain financial intermediaries in return for useful information (acquired in the course of their duties in the employ of the financial institutions) supplied or for commission received by the financial intermediary on deals concluded for financial institutions or for advice supplied by the employees. This Office has been informed that certain employees in the gilt- and semi-gilt departments of financial institutions actually enter into transactions for own account and that such transactions are not recorded in the books of their employers.
-
This Office considers the practices described as highly irregular and most undesirable (if not fraudulent) especially as it creates a conflict of interest for the dealer and calls into question his loyalty and obligations to his employer - he cannot act simultaneously for own account and serve the best interests of his employer.
-
Each friendly society is requested to determine forthwith to what extent (if any) its officials participate in these practices and to inform this Office in writing as soon as is practicable but not later than 15 August 1983 -
-2-
(i) whether any of these practices have occurred in its particular organisation, and if so
(ii) whether these practices have been discontinued, and
(iii) of the name(s) of the official(s) as well as full details of the transaction(s) involved.
-
Your kind assistance is appreciated.
-
A copy of this circular is enclosed for your auditor. Kindly have the attached acknowledgement form signed by him also before returning it to this Office.
[Signature]
REGISTRAR OF FRIENDLY SOCIETIES
MH/2938A