Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties11. Governance |
| (1) | A central counterparty must have robust governance arrangements that are clear and transparent, promote the safety and efficiency of the central counterparty, and support the stability of the broader financial system, other relevant public interest considerations, and the objectives of relevant stakeholders. |
| (2) | A central counterparty must ensure that the governance arrangements provide for— |
| (a) | the role, responsibilities, term and composition of the controlling body and any committees of the controlling body or other committees of relevance to the central counterparty; |
| (b) | processes to identify, assess, manage and mitigate potential conflicts of interest of members of the controlling body, managers, employees or any related party of the controlling body; |
| (c) | clear and direct lines of responsibility and accountability, particularly between management and the controlling body; |
| (d) | sufficient authority, independence, resources and access to the controlling body for key functions such as risk management, internal control, and audit; |
| (e) | an effective internal audit function, with sufficient resources and independence from management to provide, among other activities, a rigorous and independent assessment of the effectiveness of the central counterparty’s risk-management and control processes; |
| (f) | the role, responsibilities and structure of senior management; |
| (g) | the shareholding structure; |
| (h) | the internal governance policy; |
| (i) | the design of risk management, compliance and internal controls that includes the central counterparty’s risk-tolerance policy, assigns responsibilities and accountability for risk decisions, and addresses decision making in crises and emergencies; |
| (j) | the procedures for the appointment, performance evaluation and removal of members of the controlling body and senior management; |
| (k) | oversight of outsourcing arrangements; |
| (l) | processes for ensuring performance accountability to stakeholders; and |
| (m) | the adoption and use of models, such as for credit, collateral, margining, and liquidity risk-management system. |
| (3) | A central counterparty must disclose that the governance arrangements to the Authority, shareholders and where appropriate, its clearing members, their clients and the public. |
| (4) | A central counterparty must have a controlling body which must be sufficiently independent. |
| (5) | The compensation of the independent and other non-executive members of the controlling body may not be linked to the business performance of the central counterparty. |
| (6) | A central counterparty may not share human resources with other group entities unless it is in terms of an outsourcing arrangement. |
| (7) | A central counterparty must have a risk, compliance and information technology function under the direction of a chief risk officer, a chief compliance officer and a chief information technology officer respectively, to ensure that the central counterparty operates with the necessary level of human resources to meet all of its obligations. |
| (8) | A central counterparty must establish and maintain a permanent and effective risk management function under the direction of a chief risk officer. |
| (9) | The chief risk officer referred to in subregulation (8) must— |
| (a) | implement the risk management framework; and |
| (b) | make appropriate recommendations to the risk committee or controlling body regarding the central counterparty’s risk management functions. |
| (10) | The compliance function must operate independently from the other functions of the central counterparty with the necessary authority, resources and access to all relevant information. |
| (11) | The risk and information technology functions must report to the controlling body either directly or through the chair of the risk committee. |
| (12) | A central counterparty must have an internal audit function, which must report directly to the controlling body. |