Recommendation is one of the more than 40 punted by the South African Reserve Bank, the National Treasury and the Financial Sector Conduct Authority. File Photo: IOL

JOHANNESBURG – The fight against private-sector corruption in South Africa is set to receive a shot in the arm if recommendations contained in the draft 2018 Financial Markets Review are implemented.

One proposal is that people who expose malfeasance be financially rewarded for their efforts. 

The recommendation is one of the more than 40 punted by the South African Reserve Bank, the National Treasury and the Financial Sector Conduct Authority to rein in misconduct in South Africa’s world-renowned financial markets.

The institutions yesterday published the report, which reviewed the country’s over-the-counter fixed income, currency, commodities and derivatives markets. 

“It is recommended that the regulators consider implementing a programme that rewards whistle-blowers for providing information about substantial misconduct in financial markets that leads to a successful enforcement action with monetary sanctions,” reads the report.

If this recommendation becomes reality, it would mean South Africa will join countries like the US in putting together a legal framework to pacify whistle-blowers. The US took steps to provide monetary incentives to individuals, who come forward to report possible violations of the Commodity Exchange Act.

The move came in the wake of the 2007 financial markets crash that hurt the global economy.

Last month the US authorities awarded a record $30 million (R444.07m) to a whistle-blower who voluntarily provided key original information that led to a successful enforcement action.

The head of Corruption Watch’s legal and investigation unit, Leanne Govindsamy, said the organisation supported calls for whistle-blowers to be incentivised. “It is important that those incentives are linked to successful enforcement/conclusion of cases and that there be mechanisms in place to prevent any abuse of such an incentive scheme,” Govindsamy said.

The draft financial market review, which has been opened for public comment and suggestion until the end of this month, also called for sweeping changes in how markets are regulated.

The review also recommended that regulators consider obliging market participants to inform them if misconduct is detected or suspected. It further recommended that authorities must require that short sales be flagged on exchanges and reported to the exchange and/or the regulator.

In another major proposal, the review calls for regulators to investigate the characteristics and structure of the South African corporate primary and secondary bond markets, including listing requirements, liquidity, transparency, participants and use of trading technology and venues.

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