Strate’s e‐Voting platform welcomes two new clients

Strate’s e‐Voting platform welcomes two new clients

Strate’s e‐Voting platform has achieved another key milestone: the operationalisation of two new clients. Merchant West Investments and Sesfikile Capital Managers, with combined assets under management of R23.5 billion. They are now live to process voting instructions via our fully digital solution.

We are pleased to continue serving the financial market ecosystem through our innovative, groundbreaking e-Voting platform, which offers a fully digital secure platform to connect companies to their investors.

Through full integration with our core CSD platform, our e-Voting platform uses our existing digital legal ownership records to enable seamless and legally-binding voting on securities in the public and private markets.

e-Voting seamlessly connects issuers and investors, increasing transparency and efficiencies across the value chain.

Other benefits include:

  • Real-time voting from any location
  • Ability for voters to change their vote at any time before meeting close
  • Ability for voters to direct questions to the meeting chairperson
  • No manual intervention at any stage in the value chain
  • Improved corporate governance through interactive, audited reports
  • Data security using blockchain technology
  • A true end-to-end solution

To find out more about Strate’s e-Voting platform, please contact our e-Voting team on e-Votingteam@strate.co.za.

Doing good in our communities through “Ride for a cause”

Doing good in our communities through “Ride for a cause”

At Strate, we support the country’s transformation agenda by doing good in our communities. Through our “Do Good” initiative, our employees raise funds for non-profit organisations (NPOs) and Strate matches a percentage of the donations.

In our latest “Do Good” initiative, Strate Chairman Nigel Payne and his brother Adrian Payne will once again take part in the Freedom Challenge, Race across South Africa (RASA), under the theme “Ride for a cause”. Nigel and Adrian aim to raise funds for the Reach for a Dream Foundation, a South African NPO, which over the last three decades has brought hope and happiness to tens of thousands of children fighting life-threatening illnesses.

We are partnering with Reach for a Dream as it aligns with our aim to create sustainable infrastructure for a better South Africa. Stay tuned for more information about this initiative.

To support the brothers’ fundraising efforts, click here. Find out more about the Freedom Challenge here.  Donations for this cause will qualify for a Section 18A certificate. Strate will match a certain amount of the total donations received, which will go to the Reach for a Dream Foundation.  

The winter Freedom Challenge start days are from 13 – 22 June 2023, with 2 150km of adventure riding and 33 000m of climbing. The cut-off for RASA is 26 days. The Payne brothers start their journey on Tuesday, 20 June 2023.

Standard Chartered Bank and Sanlam Investment Management join Strate e-Voting platform

Standard Chartered Bank and Sanlam Investment Management join Strate e-Voting platform

Strate is delighted to announce that our e-Voting service has reached another significant milestone. Standard Chartered Bank and Sanlam Investment Management have operationalised onto the e-Voting platform and are able to process voting instructions via our fully digital solution.

This is another key achievement as we continue to serve the South African financial market ecosystem. Our ground breaking e-Voting platform is a secure web-based application that enables digital shareholder meetings for both South African and foreign incorporated companies. The platform provides a fully digitised experience that seamlessly connects issuers and investors throughout the proxy voting lifecycle.

Sanlam Investment Management will be subscribing to the e-Voting platform with effect from Monday 12 June 2023.

“As a prominent player in the financial services industry, Sanlam investments continuously strives to optimise and automate our processes. In an ever-changing world, the e‐voting platform allows us to participate, vote real time, and amend votes at any time before a meeting closes. In collaboration with our CSDPs, e-Voting allows us to seamlessly, and within a legally binding process, vote on securities in the public and private markets.” says Dewald du Toit, Sanlam Investments.

We are pleased to have now operationalised eight asset management clients onto our e-Voting platform, fully enabled by all the CSD Participants. This creates compelling efficiencies by:

  • Digitising the voting process
  • Enabling voters to direct questions to the meeting chairperson
  • Enabling voters to change their vote at any time before the meeting closes
  • Real-time voting from any location
  • Reducing the cost, paperwork and complexity of meetings for all parties, from issuers and investors to custodians and asset managers
  • Creating transparency of shareholder decision making at meetings
  • Improving corporate governance through interactive, audited reports

To find out more about e-Voting, please get in touch with the Strate e-Voting team Votingteam@strate.co.za

Strate compliance officer exams on hold to enhance syllabus

Strate compliance officer exams on hold to enhance syllabus

In serving the financial markets, Strate aims to provide training that is relevant, useful and informative. As the capital markets have evolved over the past 10 years, it is essential that the training material stays relevant and fit-for-purpose. To achieve this, we have suspended the Strate compliance officer exams with immediate effect in order to refresh the syllabus. 

If you are currently registered or enrolled to write the Strate compliance officer exams, facilitated by the South African Institute of Financial Markets (SAIFM),  SAIFM will automatically extend the expiry date of the examination and you do not need to take any further action.

If you cannot wait until the exams resume, SAIFM will provide you with a full credit for any examinations already purchased. Contact susan@saifm.co.za to make arrangements.

We will let the market know when the exams will start again.

We apologise for any inconvenience, but trust that an enhanced syllabus will ensure that compliance officers and other market stakeholders are equipped with the necessary skills and information to excel in their role.

For more information or queries, please contact strate-supervision@strate.co.za or Strate Academy at academy@strate.co.za

Have you considered Strate’s triparty collateral platform to optimise non-cash collateral and minimise tax, credit and operational risk?

Have you considered Strate’s triparty collateral platform to optimise non-cash collateral and minimise tax, credit and operational risk?

Recent amendments to the “collateral arrangement” exemption in the Securities Transfer Tax Act provide a compelling reason to re-evaluate your collateral management strategies.

Strate is South Africa’s principal central securities depository (CSD), responsible for the safekeeping of the legal, digital record of securities ownership. In partnership with Clearstream (part of the Deutsche Börse group), Strate provides an internationally renowned triparty collateral platform that integrates with, and leverages off, our core CSD function, to facilitate the automated, seamless, and traceable movement of non-cash collateral based on client-defined rules. In this way, we aim to mobilise under-utilised securities, reducing the demand for cash as collateral, which increases the availability of liquidity in a portfolio as cash liquidity buffers are not consumed by collateral arrangements. It also enhances portfolio performance as extensive cash buffers are not required.

Triparty collateral platforms are well established globally and critical to the functioning of international markets, connecting and creating an ecosystem of central and commercial banks and buy-side clients to optimally manage the cost of capital, liquidity and collateral optimisation needs.

The most recent amendments to the “collateral arrangement” exemption in the Securities Transfer Tax (STT) Act provide a compelling reason for South African market participants to re-evaluate their collateral management strategies.

A brief history of “collateral arrangements”

Prior to the introduction of the “collateral arrangement” exemption in the STT Act in January 2016, South African financial market participants were restricted to either providing cash collateral via an outright transfer in title, or providing non-cash collateral via a pledge. This was limiting for a collateral receiver, as pledged collateral could not be re-used by the collateral receiver (or the collateral giver). As the common law considered securities as personal rights, they could only be granted under a pledge when given as collateral.

Section 38 of the Financial Markets Act of 2012 introduced the concept of an out-and-out cession of securities. Out-and-out cession permits the transfer of ownership of securities to the collateral receiver, along with the consequent right of use. The tax treatment of the out-and-out cession of securities was not addressed at the time, and, under the STT Act, this meant that STT and Capital Gains Tax (CGT) would be applied against every out-and-out cession of non-cash collateral, making it economically unviable.

To counter this, the “collateral arrangement” exemption was introduced as an amendment to the STT Act in January 2016 to provide conditions upon which non-cash collateral could be transferred via an out-and-out cession and benefit from an exemption to STT and CGT. The market welcomed the introduction of this exemption and immediately adopted it.

Further changes have been made since 2016, including the extension of the 12-month period for the return of equivalent non-cash collateral to 24-months, broadening the definition of “identical share/security” to cater for specified corporate events, and including listed South African government bonds as allowable collateral.

The amendments that came into effect on 1 January 2023 require market participants to urgently revisit their collateral arrangements. Prior to 1 January 2023, non-cash collateral receivers could re-use collateral they received in any way they wanted to, subject to them being able to return equivalent securities to the collateral giver within a 24-month period. If this was done, and if the other requirements of the “collateral arrangement” were met, then no tax consequences would apply to either the initial transfer or return of the collateral securities.

The 2023 amendments to the “collateral arrangement” exemption introduce restrictions on the re-use of collateral securities that are received. The defined, allowable cases where the re-use of securities will continue to benefit from tax exemptions are now limited to:

  • A further collateral arrangement
  • A repurchase agreement entered into with the South African Reserve Bank (SARB) as contemplated in section 10(1)(j) of the South African Reserve Bank Act
  • Complying with Regulation 28 of the Pension Funds Act, or
  • Securing overnight cash placement to comply with the Basel III Supervisory Framework for measuring and controlling large exposures (LEX)

The above allowable cases are referred to as the “permitted purpose”.

If collateral securities are re-used by the collateral receiver for any purpose other than the permitted purpose, then the tax exemptions will not apply. Per the Binding General Ruling (BGR) issued by the South African Revenue Service (SARS) in November 2022, the collateral giver, through no fault of its own, may also be liable to pay tax on the initial, qualifying (exempt) transfer of the collateral securities if the collateral receiver uses such securities other than for a permitted purpose.

Since a collateral giver has no control over how the collateral receiver decides to re-use collateral securities, but may suffer adverse tax consequences as a result of these actions, there is an understandable reluctance to continue to provide non-cash collateral via an out- and-out cession without seeking indemnification from the collateral receiver.

Should such an indemnity not be forthcoming, the collateral giver may revert to providing collateral via a pledge. This will be limiting for the collateral receiver as a pledge does not permit any right of use – and it would be a regression for the market.

Out-and-out cessions of collateral were introduced and permitted with the intention of reducing “transaction costs and market pricing because of the ability to rehypothecate collateral and reduce tax costs and making South Africa more attractive as an investment destination” (Explanatory Memorandum on the Taxation Laws Amendment Bill, 2015).

Limited by the inability to rehypothecate pledged assets, the collateral receiver may insist on only receiving cash collateral, potentially increasing the cost for the collateral giver, and having a negative impact on liquidity on the broader market.

How Strate’s triparty collateral platform supports and enables compliance with the “collateral arrangement” requirements

Strate’s world-class collateral platform connects collateral givers and receivers in an efficient, automated and robust way. The service leverages our core function of maintaining the legal, digital record of ownership as a CSD, as well as our core settlement and asset servicing capabilities. This enables us to facilitate the traceable re-use of securities as collateral, if permitted, and supports a transition away from manual oversight and management of collateral to automated, rules-based processes that can be managed by exception.

In line with the allowable re-use cases, our platform allows for the monitoring of re-use in a further collateral arrangement, as well as for securing overnight cash placements for LEX purposes. The SARB is currently working on a triparty collateral project, and we will be able to support repurchase agreements with the SARB should they join our collateral ecosystem.

It is this ability to both trace and manage re-use (if required) that will enable collateral givers and receivers to most easily comply with the requirements pertaining to their use of non- cash collateral within the permitted purpose. When using our service, collateral givers will firstly elect whether they are providing collateral through a pledge or an out-and-out cession. If pledge is elected, securities are flagged in favour of the collateral receiver and the pledge is perfected at the level of the CSD. If out-and-out cession is elected, the collateral giver must also choose whether to permit or restrict re-use.

If re-use is permitted, the collateral securities may only be re-used in a transaction with another counterparty that is also a client of the triparty collateral service. This creates a secure collateral ecosystem where the movement of securities can be traced throughout the lifecycle, in order to provide the automated services required for substitution, optimisation or mark-to-market purposes, as well as managing the tax consequences.

Another option is for the collateral giver to elect out-and-out cession and restrict re-use. While not used at present, market participants may want to consider this as a compromise. This will give the collateral giver peace of mind from a tax risk perspective and will provide the collateral receiver with immediate access to collateral and netting processes should there be an event of default. It would not be possible to manage this scenario outside of the controls provided by a platform such as ours.

Most importantly, under all circumstances within our triparty collateral platform, the right to sell securities remains with the collateral giver as the beneficial owner of the securities.

Optimising capital and balance sheet management, while minimising credit and operational risk

By connecting collateral givers and receivers through our platform, we enhance efficiencies through the automated, rules-based selection, allocation, optimisation and substitution of collateral in accordance with the collateral receiver’s pre-defined eligibility, while maintaining the integrity of the collateral giver’s allocation priorities. In this way, a collateral receiver can expect to always receive eligible collateral, while the collateral giver can prioritise what they consider to be cheapest-to-deliver, thereby ensuring greater retention of high-quality assets and contributing to better capital management.

Collateral allocated by our platform is evaluated and reconciled daily, ensuring that all exposures are optimally covered, while eligibility and sufficiency of collateral for both giver and receiver are monitored in near-real time. The risks of over- or under-collateralisation are managed and reduced, as are concerns about holding unqualified collateral.

We provide automated monitoring of adherence to a range of criteria, including haircuts, concentration limits, credit ratings, issuer ratings, price age and volatility, average traded volume, as well as industry sector or specific ISIN exclusions, thereby ensuring that the risk associated with holding securities as collateral will always be within the parameters defined by each client.

The use and demand for cash as collateral is minimised, allowing it to be directed to the real economy to promote investment and growth, while the vision of collateral fluidity, mobility and optimisation can be operationalised on a market-wide basis, leading to better pricing and risk reduction. In this way, we can develop and grow the South African capital markets, ultimately leading to sustained economic growth to the benefit of all.

For more information, please contact Farzana Khan, Head of Collateral Services: FarzanaK@strate.co.za

Strate acquires Trustlink SWIFT Bureau services business

Strate acquires Trustlink SWIFT Bureau services business

Strate has acquired the Trustlink SWIFT Bureau services business offered in South Africa and the rest of Africa. The transaction came into effect on 1 January 2023, following an extensive process, including acquiring approval from the Competition Commission.

Building on our commitment to serve the South African financial market, the transaction will enhance and complement Strate’s Integration Services business, enabling us to leverage scale and efficiencies to the benefit of all our clients. The transaction will lead to growth in message volumes and add scale to the fixed infrastructure that we already have in place for our SWIFT bureau services, allowing future cost containment for our clients.

Trustlink will benefit from the association with a strong, trusted and neutral brand, that will enable the bolstering of sales activity locally. In addition, there is the potential to discover growth opportunities in the rest of Africa through partnerships with Strate’s banking shareholders, to create secure and efficient communication networks. There is also the opportunity to provide an alternative, cost-effective private network framework to Trustlink’s existing and future clients.   

This is exciting news for both Strate and Trustlink, as the acquisition will strengthen both businesses and create mutually beneficial opportunities that will ultimately benefit our clients.

Beneficial Ownership Register data sales to resume in March 2023

Beneficial Ownership Register data sales to resume in March 2023

Strate is pleased to announce that we will resume the provision of Beneficial Ownership Register (BOR) data services to clients from 1 March 2023.  

 

Following the implementation of the Protection of Personal Information Act (POPIA) and the legal guidance given to Strate at the time to terminate our data services in July 2021, we embarked on an extensive engagement process with our regulators and industry players. We also sought further input from external legal counsel in an attempt to find a way in which transparency of securities ownership could still be enabled. We wanted to ensure that we processed the BOR data in a manner that supports the spirit and purpose of POPIA while achieving the objectives of the Financial Markets Act (FMA), which is aimed at promoting fairness and transparency in the South African financial markets. We are currently in the process of implementing enhanced controls to ensure we meet these objectives.

 

We recognise that the data contained in the BOR is essential to the services provided by some of our clients and enables them and other stakeholders to build investor confidence in South Africa.

 

Should you require assistance or wish to subscribe to the BOR data service, please contact strate-registerservices@strate.co.za

 

Regards,

Beverley Furman

Head of Operations and Change

Connecting with you at Strate Nexus

Connecting with you at Strate Nexus

Our upcoming Strate Nexus features an exclusive line-up of industry leaders who will provide insights on opportunities, risks and inefficiencies within the South African financial markets – and what we can do to grow our ecosystem and attract more investment.

Strate Nexus is our platform to share valuable insights and have thought-provoking discussions with our key stakeholders. We will provide an update on the latest initiatives we are working on in fulfilling our purpose of serving the financial market in South Africa. This is also an opportunity to get feedback to ensure we stay connected to the financial market ecosystem.

Attendees can look forward to fresh ideas, new perspectives, and deep insights on the outlook for the South African financial markets over the medium term.

Our panel of leading industry experts features:

  • Marilyn Ramplin, Founder & CEO Novia One Group (moderator)
  • André Nortjé, CEO, Strate (Pty) Ltd
  • Tim Masela, Head of the National Payment System Department, South African Reserve Bank
  • Busisa Jiya, CEO of the Association for Savings and Investment South Africa
  • Colin Parry, CEO of International Securities Services Association
  • Astrid Ludin, Deputy Commissioner, Financial Sector Conduct Authority
  • Bongi Kunene, Managing Director, Banking Association South Africa

We are looking forward to engaging with our stakeholders on how we can work together to enhance our capital markets and strengthen the overall financial market ecosystem, to the benefit of SA Inc.

For more information on Strate Nexus on 22 February contact StrateCommunication@strate.co.za

Broadridge and Strate collaborate on enhanced proxy voting experience

Broadridge and Strate collaborate on enhanced proxy voting experience

Strate and Broadridge Financial Solutions, a global fintech leader, have completed the integration of their respective end-to-end vote processing solutions to create a better proxy voting experience in South Africa . This collaboration represents a shared commitment to drive greater levels of shareholder engagement by institutional and retail investors – at both national and international levels.

Broadridge’s extensive user community, including global and domestic banks and brokers, custodians, wealth managers and local agents, can now access Strate’s e-Voting service. The e-Voting platform is delivered in collaboration with Strate and the Central Securities Depository Participants, to streamline processes and achieve operational efficiency throughout the proxy voting lifecycle in South Africa, while also supporting compliance obligations under South Africa’s Companies Act. 

“We are excited to launch our fully digital South African voting service, supporting the growing desire of investors globally who want to exercise their corporate governance entitlements in this very strategic market,” said Demi Derem, General Manager of International Investor Communication Solutions, Broadridge.

“Our successful collaboration with Strate represents another critical step in linking leading providers at the heart of financial infrastructure with our network of global investors to enable seamless investor voting and engagement.”

Firms using the service can obtain timely and accurate receipt of “golden copy” digital meeting notifications sourced directly from Strate, a significantly extended voting window (up to meeting-date-minus-one) for underlying clients, and enhanced transparency through confirmation of votes submitted.

“As a pioneer in digitisation in South Africa, Strate partners with leading global technology providers to collaborate on digitally innovative solutions, which is why we are proud to have worked with Broadridge on our e-Voting solution,” said Gregory Naicker, Strate Head of CSD Services. “Through digital innovation we integrate and connect critical players in the financial market ecosystem, leading to integrity and trust in our markets.”

“The partnership with Strate and Broadridge cements Standard Bank’s promise of delivering continuous value to our clients, offering flexibility in choosing a proxy voting execution partner,  providing better voting deadlines, delivering enhanced proxy disclosure information as well as moving towards fully digital and automated electronic voting solutions,” said Llewelyn Ford, SBSA Head of Investor Services, South Africa. “This development moves the market closer to achieving the desired level of efficiency and lowers risk in the proxy voting environment.”

Broadridge Financial Solutions  provides critical infrastructure that serves as a global communications hub enabling corporate governance by linking thousands of public companies and mutual funds to tens of millions of individual and institutional investors around the world. Its technology and operations platforms underpin the daily trading of more than U.S. $9 trillion of equities, fixed income and other securities globally.

 

Strate’s supports Reach for a Dream by riding for a cause

Strate’s supports Reach for a Dream by riding for a cause

At Strate, we support the country’s transformation agenda by doing good in our communities. Through our “Do Good” initiative, our employees raise funds for non-profit organisations (NPOs) and Strate matches a percentage of the donations.

In our latest “Do Good” initiative, Strate is supporting Chairman Nigel Payne and his brother Adrian Payne, who recently completed the summer Freedom Challenge, a race across Africa, to raise funds for the Reach for a Dream Foundation.

Under the theme “Ride For A Cause”, Nigel and Adrian completed the Double Freedom Challenge – both the winter and summer challenge. This amounted to 38 days, 4 300km of extreme offroad riding with 6 600m of climbing, often carrying their bikes over South Africa’s highest mountains.

The brothers are raising money for Reach for a Dream, a South African NPO, to build a Dream Room at a community-based medical facility in Gauteng. This will be a place of fun, play, family time and dreams of hope for children undergoing life-saving treatments.

To support the brothers’ fundraising efforts, click here. Find out more about the Freedom Challenge here. Donations for this cause will qualify for a Section 18A certificate. Strate will match a certain amount of the total donations received, which will go to the Reach for a Dream Foundation.  

The Payne brothers took 17 days to complete the Summer Race across South Africa 2022 Freedom Challenge in October 2022. They were placed second in the double-up challenge.