Tania Wimberley reveals why the JSE implemented the CEO and FD sign-off regulation

CFOs asked Tania all their questions around the sign off regulations, and a heated debate ensued.

On 30 September, CFO South Africa hosted another edition of its CFO Community Conversations, in which JSE head of financial reporting issuer regulations Tania Wimberley explained the exchange’s new “CEO and FD sign off” listing requirement.

Addressing the biggest question in the room, “Why?”, Tania explained that, to understand the rule, you have to go back to an initiative the JSE started in September 2018 called the JSE Consultation Paper. “The Consultation Paper was the JSE’s regulatory response to ‘recent events’, which, at the time, was a mess of corporate scandals.”

She said that the purpose of the paper was to engage with the market and to discuss ideas as to what the JSE as the securities regulator could do and also to challenge others in the market as to what role they could play. “The whole focus of the paper and initiative was to restore trust in the market. If we don’t have a trustworthy market, we can’t be a platform for listed companies to come and raise capital or where investors come and invest their money.”

She explained that to be effective a capital market needs to have trust. “But the trust has been eroded with things that happened at that time.”

So, as part of the Consultation Paper, the JSE put out ideas and invited the public to comment on them. Flowing from that, a series of requirements were proposed in April 2019.

“The explanatory document for this particular requirement explains that, by requiring these obligations from the CEO and FD in their own names, the JSE believes it will strengthen the financial reporting process,” Tania said.

She further explained that the provision underlines that the responsibility for internal control of the financial reporting process and their accuracy rests firstly with the executive board and management. “We received a request to impose this particular requirement in response to the Consultation paper.”

During the consultation process on the proposed rule changes one of the matters raised was from auditors. “Their request was that the rule should be linked to an international framework,” Tania said.

The JSE didn’t believe that imposing an specific international framework was appropriate for South Africa at this stage. Rather each company should develop their own entity specific approach “So the auditors asked how they were going to audit this, and we made it clear that we were not asking them to audit it.”

Tania explained that, rather than being an auditable action, this is a statement made by the executives. They effectively give the market comfort that they’ve done everything in their power to make sure that there are appropriate financial controls and that the information on which investors base their decisions is correct.

The listings requirement (paragraph 3.84(k)) was introduced in December 2019 and is effective for issuers with a year-end on or after 31 December 2020.

The attendees then had a chance to raise their questions and concerns around the new regulation, and a heated debate ensued.

[More to follow.]