5. Procedures for Treasury Outsourcing Companies and Foreign Exchange Brokers

Treasury outsourcing companies and foreign exchange brokers must conduct their business through an Authorised Dealer. The guidelines for the conduct and regulating of treasury outsourcing companies and foreign exchange brokers, excluding interbank brokers who are appointed on application, are as follows:

5.1 Treasury outsourcing companies and foreign exchange brokers must obtain approval from the Financial Surveillance Department via an Authorised Dealer prior to commencing any foreign exchange business.

The treasury outsourcing company and foreign exchange broker application form may be downloaded from the South African Reserve Bank’s website: www.reservebank.co.za by following the links: Home > Regulation and supervision > Financial surveillance and exchange controls > Guidelines > Treasury outsourcing companies/foreign exchange brokers application form.

5.2 The following conditions for conducting the business of a treasury outsourcing company and foreign exchange broker must be strictly adhered to:

(a) the applicant must at all times be in possession of a valid Financial Services Provider license issued by the Financial Sector Conduct Authority.

(b) a letter of compliance, on the official letterhead of the applicant signed by two senior officials, must be submitted to the Financial Surveillance Department on an annual basis, for the period ending 31 December of each year. The letter of compliance must be emailed to SARBToC@resbank.co.za, specifying the wording ‘Treasury Outsourcing Company/Foreign Exchange Broker Letter of Compliance’ in the subject field. The format of the letter of compliance can be downloaded from the South African Reserve Bank’s website: www.reservebank.co.za by following the links: Home > Regulation and supervision > Financial surveillance and exchange controls > Guidelines > Treasury outsourcing company/foreign exchange broker letter of compliance.

(c) applicants may not buy or sell foreign currency for their own account and may not hold foreign currency or borrow or lend foreign currency;

(d) applicants may only act in the market as intermediaries (never as a principal) and should accordingly match a principal client with an Authorised Dealer. Prior to such business being conducted they should be properly mandated to act as agents on behalf of their clients;

(e) the services provided by applicants may include identifying, monitoring and mitigating foreign risks, as well as completing and handling documentation, general administration of client’s foreign exchange exposure and concluding spot and/or forward transactions with an Authorised Dealer;

(f) all foreign exchange transactions must be concluded and settled between the Authorised Dealer and the client. The client must at all times be the principal to all the foreign exchange transactions and the exchange rate must be determined by the Authorised Dealer);

(g) the settlement of foreign exchange transactions must accordingly be accommodated through the bank account of the client and not that of the treasury outsourcing company or foreign exchange broker;

(h) all cross-border reporting and documentary evidence must, at all times, be completed in the name of the client;

(i) applicants must at all times when requested to do so be able to demonstrate a complete audit trail, including the actual clients’ instructions, for all transactions booked on behalf of clients; any fees charged for the services provided by the applicant must be invoiced and settled in Rand and fully disclosed to the client;

(j) the requirements of the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) must be complied with by the Authorised Dealer and the treasury outsourcing company or foreign exchange broker concerned. In addition, the treasury outsourcing company or foreign exchange broker must comply with the requirements of the Financial Advisory and Intermediary Services Act, 2002 (Act No.37 of 2002);

(k) the Financial Surveillance Department has the right at any stage to carry out an inspection of the applicant’s activities, records, management controls and any other aspects deemed necessary; and

(l) the Financial Surveillance Department may impose any further conditions it may deem necessary.