Securities and Exchange Commission Issues Guidelines to Govern Self-Regulatory Organisations in the Securities Industry

The Securities and Exchange Commission (SEC) has issued the Securities Industry (Self-Regulatory Organisations) Guidelines, 2022 (SEC/GUI/005/02/2023) (the SRO Guidelines) to regulate the recognition, governance and business operations of self-regulatory organisations (SROs) in the securities industry. The SRO Guidelines provide:

a. conditions for being recognised as (and the revocation of the recognition of) an SRO;

b. guidance on the governance arrangements (such as the composition of its governing body, tenure of office and membership qualification) applicable to SROs;

c. for the functions which SROs may perform; and

d. financial and other reporting obligations of SROs.

The Securities Industry Act, 2016 (Act 929) as amended (the Securities Industry Act) defines an SRO as a registered securities exchange or an organisation of intermediaries which represents a particular segment of the securities market and has been approved by the SEC as self-regulatory. SROs are important actors in the securities industry because they create rules to foster compliance with and enforce industry and professional standards in the relevant sector of the securities industry within which they operate. To assist SROs in the exercise of their oversight functions, the Securities Industry Act mandates SROs to make rules with the prior approval of the SEC and enables the SEC to delegate any of its statutory powers or functions to an SRO. An SRO can enforce its approved rules without any further intervention from regulators such as the SEC.

By issuing the SRO Guidelines, the SEC has satisfied its obligation under the Securities Industry Act to specify the terms and conditions which regulate the recognition of SROs. It is expected that the SRO Guidelines would strengthen the regulatory framework for the supervision of SROs, resulting in the enhanced compliance with industry and professional standards, protection of investor interest, and ultimately, promoting the orderly growth and development of a robust and efficient securities market.