Bachelor of Business Administration (Hons) 2014

12 BBAD

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BBA 2014

*Chapter 3

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*The financial system is among the most heavily

regulated sectors world over for two reasons:

To increase information available to investors

and also to ensure that FIs are fit and sound.

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*Central governments have assigned the FIs

regulatory agencies to implement laws to

protect consumers with regard to financial

decision making.

*These responsibilities include: writing &

interpreting laws; compliance ;consumer

protection, handling consumer complaints, etc.

*www.namfisa.com.na

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*FIIs are regulated in an attempt to preventthese types of market failures and the coststhey would impose on the economy and thesociety at large.

*Market failures indicates that system is not fitenough in terms of monitoring.

*Imagine what will happen if we experiencebank failures or insurance companies files forbankruptcy, we will have our assets and ourlives that are fully exposed.

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*To protect the public and the economy from financial panics, the government has implemented six types of regulations:

1. Restrictions on Entry (refer to the Banking Institutions Act)

2. Disclosure

3. Restrictions on Assets and Activities

4. Deposit Insurance

5. Limit Competition (Absa/Bank whk-Leo/switch)

6. Restrict the Interest Rates (www.sec.com)

*WELCOME TO NAMFISA

*In Namibia, Non-Banking Financial Institutions are regulated

by Namibia Financial Institutions Supervisory Authority.

*It operates under the auspices of the Ministry of Finance,

and it has no profit motive.

*Its operations are fully financed through imposition of levies,

registration and penalty fees on financial institutions under

its regulation.

*NAMFISA regulates and supervises

* a broad range of institutions,

*which include pension and retirement Funds,

* long-term Insurance,

*short-term Insurance,

* medical aid schemes,

* friendly societies,

*unit trust management schemes,

* the stock exchange,

*asset managers,

* participation bond schemes,

* public accountants' and auditors',

* micro lenders,

*and hire purchase outlets.

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*In SA, NBFIs are regulated through the Financial Service Board (FSB);

*Under the auspices of the Department of Finance.

*The JSE Securities Exchange (formerly known as the Johannesburg Stock Exchange)

* is broadly governed by the Securities Services Act (SSA) of 2004.

*www.fsb.org.za

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* SSA, which is administered by the FSB,

* lays down certain rules that govern the activities of the JSE.

* SSA requires that the exchange draft a rule book, approved by the FSB,

*which addresses issues of capital and

* certain other requirements for membership of the exchange,

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*The type of books of account that must be kept by a brokerage firm,

* Provision in respect of minimum cover,

*The time allowed for the payment of share purchase,

* And for the delivery of shares, and

*The condition under which short (bear) sales may be executed.

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*SSA also calls for brokerage firms to

* submit annual audited financial statements to the JSE.

*SSA also states that the representative of the FSB

* is entitled to attend any JSE Committee, and

*specifies the requirements for the formation of a stock exchange.

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*Although there is only one stock exchange in SA,

* The Securities Services Act allows for

* The existence and the operation of more than one exchange.

*Each year the JSE must apply to the licensing committee ,

*Of the FSB for an operating license for the coming year.

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*The JSE was founded in 1887 out of necessity and not simply

out of a desire to have a South African stock exchange.

* Gold-mining fever had gripped the country.

* The miners needed funds for equipments and

* Also for expansion in order to continue with business

operations.

*The JSE is governed by the JSE Committee which consists of

between 10 to 15 members.

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*These members are elected from

*The existing brokerage firms through

*A secret ballot box on an annual basis.

* Once the members have been elected,

*They in turn elect the chairperson,

*vice-chairperson,

*and the president.

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*SIs & LIs are governed by the OTS (Office of theThrift Supervisor) through FIRREA (FinancialInstitutions Reform, Recovery, and Enforcement Actof 1989).

*FDIC (Federal Deposit Insurance Corporation), anddifferent regulators, state by state.

*The FHLBS (Federal Home Loan Bank System)regulates home loan banks in the US that borrowfunds in the national capital markets and use thesefunds to make loan savings institutions that aremembers of the Federal Home Loan Bank.

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*Financial Markets are regulated by SEC throughthe Securities Act of 1934.

*The SEC has imposed regulations on financialmarkets in an effort to reduce excessive pricefluctuations. For example, the NYSE operatesunder a series of “circuit breakers” thatrequire the market to shut down for a period oftime when prices drop by large amounts duringany trading day. This is done to avoid “over-heating”! The overall supervisor is the “Fed”

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*Test in a week’s time (lets agree on the date).

*Thank you!

*Danken!

*Graci!

*Gracias

*Pranaam!