The Financial Sector Conduct Authority (FSCA) has, in terms of Section 60(1) of the Financial Markets Act (FMA), suspended the exchange licence of financial institution ZAR X, effective from August 20.

The suspension resulted from ZAR X’s noncompliance with Section 8(1)(a) of the FMA, read with Regulations 8 and 43(2) of the FMA Regulations, which relate to the liquidity and capital adequacy requirements of an exchange.

Section 60(1) of the FMA provides that the FSCA may, with the concurrence of the Prudential Authority (PA) and the South African Reserve Bank (SARB), suspend an exchange licence, for a specified period, in the circumstances contemplated in that section.

In compliance with the section, the suspension was affected with the concurrence of the PA and the SARB.

Conditions have been imposed with the suspension in terms of Section 60(4) of the FMA, requiring ZAR X to immediately inform all affected persons, including issuers with listed securities on its exchange; authorised users of its exchange; investors; appointed Central Securities Depositories; and all its stakeholders that its licence has been suspended.

Additionally, ZAR X will be required to provide the FSCA with weekly progress reports in respect of the matters referred to in the notice.

FSCA commissioner Unathi Kamlana says the FSC does not take this regulatory action lightly, given its impact.

“Our view, however, is that this is a necessary step to safeguard market integrity and the interest of issuers and the broader investing public. This is the cornerstone of our mandate as the FSCA.”

ZAR X is allowed to operate as an exchange to give effect to transactions in progress or otherwise not finalised at the date of suspension but may not allow further trading or accept new issuers to its list.

The suspension will remain effective until such time as the company rectifies its noncompliance with the capital adequacy requirements to the satisfaction of the FSCA and the PA, in which case the suspension may be lifted; or the FSCA makes a final decision on the cancellation of ZAR X’s exchange licence.

The FSCA intends to proceed, three months after the date of suspension, with the cancellation of ZAR X’s exchange licence should it fail to rectify its noncompliance with the capital adequacy requirements.