Credit Rating Services Act, 2012 (Act No. 24 of 2012)Board NoticesCredit Rating Agency RulesPart II : Organisational Requirements2. Structure and duties of the board |
| (1) | The board must adopt corporate governance policies which are consistent with the principles and practices of effective corporate governance as contemplated in the King Code on Corporate Governance Principles. |
| (2) | A credit rating agency must ensure that its corporate governance policies adhere to the following minimum requirements; |
| (a) | The board must have at least two independent members who are not involved in credit rating services. At least one of these independent directors must be resident in South Africa. |
| (b) | The independent members of the board may not serve on the board for a term exceeding a period of five years. |
| (c) | The compensation of the independent members of the board may not be linked to the business performance of the credit rating agency and must be arranged so as to ensure their independence of judgment. |
| (d) | The majority of members of the board, including its independent members, must have sufficient financial expertise which should include knowledge of the debt capital markets, investment markets and credit and risk analysis. Provided that where a credit rating agency issues credit ratings of structured finance instruments, at least one independent member and one other member of the board must have in-depth knowledge and experience at a senior level of the markets in structured finance instruments. |
| (3) | In addition to the overall responsibility of the board, the independent members must have the specific task of monitoring— |
| (a) | the development of the credit rating policy and of the methodologies used by the credit rating agency in its credit rating services; |
| (b) | the effectiveness of the internal quality control system of the credit rating agency in relation to credit rating services; |
| (c) | the effectiveness of measures and procedures instituted to ensure that any conflicts of interest are identified, eliminated or managed and disclosed; and |
| (d) | the compliance and governance processes, including the efficiency of the review function. |
| (4) | A report of the opinions of the independent members of the board issued on the matters referred to in sub-paragraph (2), must be presented to the board periodically and must be made available to the registrar on request. |