Dear Mr. Hermans

Securities Services Bill (Regulation and Supervision of Securities Services)

In respect of the imminent tabling of the above mentioned bill, herewith the written representation of Absa Bank Limited for your consideration:

Section 27 (1) A

"Every authorized user must open and maintain a trust account at a bank designated for client funds, or may use such an account opened and maintained by an exchange..."

Our understanding is that presently in terms of current JSE requirements, stockbrokers are required to deposit client money with the JSE Trustees.

Is the intention now that Banks will also provide a trust account service for this specific purpose? Would or could the JSE object to this?

Section 27 (3)

" Funds held in a trust account...are considered to be "trust property" as defined in the Financial Institutions (Protection of Funds) Act 2001".

If banks are allowed to maintain trust accounts on behalf of authorised users, what effect will curatorship, deregistration or winding-up of a bank in terms of the Banks Act 94 of 1990 have on such accounts?

Clarity with regard to the definition of "monies held in trust" and these specific trust accounts is required. Do the provisions of this bill govern existing trust accounts? Trust accounts are already provided for and defined in other Acts; how is this bill and these specific purpose trust accounts aligned with these existing definitions?

Section 35 (i)

"A Participant must have a central securities account with a central securities depository and may -

  1. deposit securities with or withdraw securities from that central securities depository
  2. transfer, pledge or cede an interest in securities through that central securities depository".

In terms of S 91 (A) 5 (b) of the Companies Act:

"A participant shall transfer uncertificated securities in a subregister administered and maintained by it, only on receipt of an instruction to transfer sent and properly authenticated in terms of the rules of a central securities depository or by order of court.

In terms of Rule 6.4.4 of the STRATE Rules:

"A CSD Participant shall ensure that every entry in an uncertificated securities account is executed pursuant to an authorizing instruction or a standing instruction received from a client or the client's duly authorized agent.

The question here is whether the client instruction requirement is expressed sufficiently in Section 35.

Section 39 (1)

The depository rules: (1) "must provide for the manner in which a central securities depository or a participant must keep records of clients, or owners, or beneficial owners of securities and limited or other interests in securities".

The current business model is such that record of beneficial owners is held at Central Securities Depository Participant level. Is the intention of this clause to afford the Central Securities Depository the ability to maintain record of beneficial owners and by so doing dispense with the role of the Central Securities Depository Participants?

Section 40 (1)

"All securities held by a central securities depository, must, unless they are bearer instruments or recorded in a subregister in accordance with section 91 A of the Companies Act, 1973, and the depository rules, be registered in the name of that central securities depository or its wholly owned subsidiary, as defined in section 1 of the Companies Act, 1973 and approved by the Registrar."

Section 91 A of the Companies Act deals with uncertificated Securities, being listed Equities and Bonds and their derivatives, the record of which is currently held by the Central Securities Depository. Money Market instruments, which pending their dematerialisation, are bearer documents. Please explain which securities in addition to these are to be registered directly in the nominee name of the central securities depository, without the use of a central securities participant.

Section 53 - Demutualisation of self-regulatory organization

Was this contemplated in previous legislation and what effect does this have on the existing shareholders of the self-regulatory organisation?

Thank you for affording us the opportunity to submit our questions, we look forward to your response.

Yours sincerely

Paul Hartzenberg


Investor Services:

6th Floor Absa Towers North

180 Commissioner Street

Johannesburg 200]

PO Box 61218 Marshalltown 2107

Tel:O11 350 4000

Fax: O11 350 7818

Swift Address: ABSA ZA JJ


The Secretary to Parliament

c/o Mr. A. Hermans

Committee Section

Parliament of the RSA

P.O.Box 15

Cape Town


Fax: (021)403 3349