South Africa’s JSE again beats the world on regulation – how they do it

South Africa’s Johannesburg Stock Exchange (www.jse.co.za) is the world’s best-regulated stock exchange for the fourth year running. The 2013-14 Global Competitiveness Report by the World Economic Forum (WEF) ranks South Africa first out of 148 countries for regulation of securities exchanges. South Africa’s financial market development ranking remains impressive at third in the world.
This is only one of high scoring factors in the report which highlight the attractiveness of the JSE and its good relationship with the regulator, the Financial Services Board.
In a press release , John Burke, JSE Director of Issuer Regulation, says: “We are very pleased with this accolade for South Africa, which indicates that the Johannesburg Stock Exchange (JSE) is a secure and credible environment to raise capital and in which to invest,” says. “Investors, regardless of size, can have a high level of comfort when using the exchange. This ranking is also testament the JSE and FSB’s sound working relationship.”
This story is from last month, but well worth repeating to congratulate Africa on the achievement.

Other high scores for South Africa
Other high scoring areas in the GCI which make the JSE attractive to global investors are: South Africa scored world second place for financing through the local equity market, moving up from third place last year. Burke says: “South Africa has access to deep pools of capital both from our well-developed local investment community and high participation of foreign investors. This makes the exchange an ideal destination to raise capital for development in the region,”
South Africa’s first place rankings for strength of auditing and reporting standards; efficacy of corporate boards; and the protection of minority shareholders’ interests. This is the first time that South Africa has achieved a first place ranking for protection of minority shareholders’ interests.

How South Africa regulates
In an 2012 interview Nicky Newton-King, CEO of the JSE, told the Oxford Business Group: “South Africa has a very interesting regulatory ecosystem, where we as the exchange act as ‘front line’ regulators by setting the listing requirements and trading rules, while the Financial Services Board supervises us in the execution of our regulatory duties. This approach is very different from other exchanges that prefer to act purely as service providers.
“Some 15 years ago, cartoons depicted the JSE trading floors with cowboys, as transparency and audit trails were highly lacking. We have since worked extremely hard to evaluate and improve every element of our regulatory DNA, and are today considered to have some of the best regulations in the world.
“However, one never wants to be the single most highly regulated global market, as regulations can be overly constrictive and you can regulate somebody out of business.. But you want to make sure that companies do business in an appropriate manner that is fully disclosed, so investors can then make an informed decision.
“We are also mindful that South African companies form a deep part of our nation’s socio-economic transformation… Rather than the US regulatory structure, where everything is based on rules, we prefer to take a principles-based approach. If someone has a good idea, even if it is not in the rules, we will look at if it aligns with what we are trying to achieve and try to make it work as best as possible.”

About the WEF Global Competitiveness Index
South Africa ranked 53rd worldwide out of 148 economies worldwide (in 2012-13 it was number 52 out of 144 countries). Released annually in September, the report rates countries according to 12 sets of criteria, including competitiveness in terms of quality of infrastructure and institutions, efficiency, market sophistication as well as capacity for innovation amongst others. Regulation of securities exchanges falls under the eighth pillar for financial market development. To view or download the full report, please visit www.weforum.org

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