2. As you may know, the JSE is a privately owned and privately funded voluntary association of members, governed by a Board of Directors. Its activities as an exchange are regulated by two Acts of Parliament, namely the Stock Exchanges Control Act, 1 of 1985 ("SECA"), which governs equities markets, and the Financial Markets Control Act, 55 of 1989 ("FMCA"), which governs financial derivatives markets. The JSE is licensed as a stock exchange (for equities) and as a financial market (for financial and agricultural derivatives) in terms of these Acts, but, in common with international practice, a philosophy of self-regulation by the markets is practised and applies to the JSE. The JSE members and their clients (investors), must therefore comply with trading and other rules set by the JSE from time to time, which rules further have to be approved by the Financial Services Board ("the FSB"), to ensure that the markets operate in a transparent and fair manner. Similarly, issuers of securities must comply with the JSE Listings Requirements which are aimed at ensuring sufficient disclosure in the public interest of all information relevant to investors.
3. At the forefront of the JSE’s current strategic positioning is the role that it plays in the electronic economy. The use of electronic networks to exchange information, products, services and payments for commercial and communication purposes is an approved and applied JSE business approach. The JSE is taking full advantage of e-commerce opportunities to derive maximum value through excellence in its core exchange business. All trading on the JSE has been electronic since 1996 and from March 2002 all equities have been dematerialised so that trades can be settled electronically through STRATE. The JSE has furthermore concluded an agreement with the London Stock Exchange in terms of which the JSE will have access to world class trading technology from 13 May 2002 for trading and information services.
4. The JSE acknowledges and appreciates the fact that Government aims, through the legislative framework in the form of the ECT Bill, to create an environment facilitating electronic commerce and the use of technology. However, the scope of the ECT Bill is extremely broad and poses many complex questions that demand interpretation in order to understand the provisions of the ECT Bill in the light of the JSE’s situation.
5. Therefore the JSE presents this submission in order to propose how the JSE believes that certain provisions of the ECT Bill should be dealt with, or amended, in order to eliminate potential problems.

1. DEFINITIONS

2.1 "electronic"

2.2 "cryptography provider"

2.3 "private body"

2.3.1 This term does not appear in the Bill.

2.4 "public body"

1. In the way that this definition is worded, the JSE currently qualifies as a "public body" for the purposes of the Bill. However, an exchange as a licensed SRO is unique in its role and function and, we believe, clearly distinguishable from the traditional notion of an "organ of state".
2. The JSE believes it should be excluded from the definition of a "public body", as the ECT Bill appears to conflict with and even limit the ability of the JSE to govern and prescribe the use of electronic media and payment in its business, which is surely not the intention of the ECT Bill.
3. As mentioned above, the JSE already uses electronic media extensively in its business. The FSB regulates the JSE in terms of SECA and FMCA to ensure that the JSE is compliant with investor protection procedures, which are designed for and probably more suited to the specific and global needs of the securities industry. Therefore the JSE does not believe that there is a need for the JSE to be included within the definition of "public body" in the ECT Bill and requests to be removed from this definition.

2.5 "World Wide Web"

2.5.1 The JSE believes that this definition is confusing and should be amended.

1. SECTION 3: Interpretation
   
   The JSE understands that the objective of this section is to make it clear that the advent of specific e-commerce and e-communication legislation should not be interpreted so as to deny any such activity, which occurs prior to the promulgation of this legislation Bill, legal force and effect.

1. However, the JSE is of the view that this section is susceptible to a reading that the three spheres of law (statutory law, common law and the Bill) must be interpreted concurrently.
2. To avoid such an interpretation, Section 3 should be amended so as to expressly provide for an order of priority in the event of conflict.

1. SECTION 4: Sphere of application

1. Unless an exclusion is adequately restricted in Column B of Schedule 1 to the ECT Bill, an exclusion of a law or a transaction in the Schedules may be interpreted so as not to permit any transaction to be performed (note the wide definition of transaction) or any document to be executed by electronic means in terms of such law. This means that unless due care is taken in the exclusion of laws or transactions, their recordal in the Schedules may have wider implications than envisaged.
2. The JSE is of the understanding that the Bill may not be referred back for public comment after amendment. If so, additional exclusions made during the legislative process could take various stakeholders by surprise and without an opportunity to comment.
3. In our view therefore, no Department or Member of Cabinet should add legislation to the Schedule without publishing such intention for comment in the Government Gazette and calling for comment.
4. To permit further exclusions without public debate could cause harm to the economy, as various transactions or documents currently executed by electronic means may be invalidated.

1. SECTION 5: National e-Strategy

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1. The JSE is not convinced that the ECT Bill should be prescriptive with regard to the establishment of a national e-Strategy. In our view, this should be an issue on the Cabinet agenda from time to time rather than being prescribed by legislation. In any event, the National e-Strategy as an internal governmental policy should not be binding on the "private sector". However, the JSE does not believe that this is made clear in the ECT Bill and section 5(4)(c)(vi) does not suffice to signify this.
2. In the event that section 5 remains in the Bill, the JSE does not believe that the JSE should be required to fall within the section and believes that the best way for this to be achieved is for the JSE to be excluded from the definition of a public body. The reasons for the JSE’s proposed exclusion are set out in paragraph 2.4 above.

1. The JSE believes that Chapter III of the Bill should address and create technology neutrality. There should also be functional equivalence for all terminology and concepts associated with physical actions or forms that are cross-cutting or generic to all other laws ("Generic Concepts"). Examples of the problems are given below.
2. It is neither practical nor feasible for these Generic Concepts to be left to individual Ministries to address in legislation and regulation on an ad hoc basis. To do so would be to create the possibility for wholesale confusion and lack of uniformity among different laws, their interpretation and administration.
3. In this regard, the JSE believes that the following Generic Concepts require attention in the Bill:
4. Use of postal services for delivery:

 

6.4.1 The expressions: "post", "mail", "registered mail", "pre-paid mail", "certified mail" etc appear in many laws. The ECT Bill must provide a mechanism to permit such actions to be satisfied by electronic delivery, where appropriate, and to create a mechanism that serves as equivalent proof of delivery as "registered mail".

5. Requirement for a "seal"

6.6 Certification

6.7 Stamp duty

2. To the extent that a document requires to be stamped, such document can only be in paper form. This will lead to an undue exclusion of transactions involving stamp duty from being able to be effected electronically. It follows that either the Bill or the Stamp Duties Act should be amended to continue to permit such transactions to be effected electronically and for stamp duty to be collected in a different manner. For instance, the payment of stamp duties could be evidenced in or on an electronic document, by electronic means.
3. Please also bear in mind that stamp duty on the issue and transfer of uncertificated securities has been superseded by the Uncertificated Securities Tax Act which was passed in order to cater for dematerialised (paperless) securities.

6.8 "In" or "on" the prescribed form

6.9 "instrument"

10. Inspection, search and seizure

6.10.1 The inspection and/or search and/or seizure provisions in many other laws do not contemplate electronic communications, electronic records or other electronic evidence stored on computer hard drives or other storage devices. The Bill should provide clarity in this regard that should apply across all laws.

11. Part 1 of Chapter III – legal requirements for data messages

1. Although Part 1 of Chapter III seems to cater for most "functional equivalence" issues adequately, these provisions, with the exception of section 13(3), apply where required by "law" (statute and regulation).
2. Consequently these provisions do not appear to apply in respect of the same issues, terms or requirements required by parties to a contract. Although the JSE is conscious of the fact that freedom of contract should prevail and that parties to an agreement should be free to deal with "technology neutrality" and "functional equivalence" as they see fit, the JSE asks you to consider whether the same rationale should not apply in the domain of contract so as to avoid disparate approaches by different parties (most of whom might be technologically illiterate).
3. Perhaps there is room for certain deeming provisions to be provided for in Part 2 of Chapter III. The provisions of this Chapter apply in any event only to the extent that the parties have not otherwise agreed.
4. Nevertheless, should the amendments suggested here be effected to the Bill, we suggest that the Bill should be referred back for further public comment and debate on (at least) such new issues introduced.

12. Section 19 (2) – other requirements

1. A mechanism should be provided to ensure flexibility by way of Regulations or Gazette Notices to add to and expand on the terms and phrases referred to in Section 19 (2) and to permit the terms or phrases to be qualified in certain respects.
2. The JSE suggests that this section should be made subject to its own new section in Chapter III with guidelines, exceptions and qualifications regarding the ability to issue notices in the Gazette.

1. In the JSE’s view and experience, the Computer Evidence Act, 1983 ("CEA") is anachronistic and unworkable in practice. It is widely acknowledged to have become redundant and out of step with modern realities. We submit that the ECT Bill presents a perfect opportunity to repeal the CEA and replace it with modern and practical requirements regarding the recognition of computer generated evidence.
2. It is submitted that the CEA will cause the much welcomed provisions of section 15 to become obsolete as the same burdensome depositions required to be made under the CEA are still required by the Bill.
3. Section 15 should rather create a presumption of authenticity (integrity) on the same basis as that provided for in section 112 of the current draft of the Securities Services Bill (which, once promulgated, will replace SECA and FMCA). This section provides that "a record (including an electronic record) purported to have been made in the ordinary course of business of a regulated person, or a copy or printout of or an extract from such record, certified to be correct by an officer in the service of such regulated person, is on its mere production in any civil, criminal, administrative or disciplinary proceedings under the Securities Services Act, the rules of a self-regulatory organisation or any other law or the common law, admissible in evidence against any person and prima facie proof of the facts contained in such record, copy, printout or extract".

1. Section 17, dealing with the production of documents or information, seems to be capable of permitting all forms of production of information to public and private bodies.
2. This appears to be an extremely wide provision and it is unclear whether this section will be capable of overriding any terminology in other laws that clearly require physical actions or documents. For instance the JSE is not sure that the section in the ECT Bill would allow for electronic delivery where the law states that a document must be produced "under the hand of" a person or "delivered by hand" to a person.
3. Also, to what extent will section 17 of the Bill disallow any other form of legislative provision in particular laws that directly or indirectly require the production of information? Does "production" include any form of transmission (e.g. use of postal services) of documents? What about a requirement in law for "registered mail" to be used?
4. The JSE is concerned as to whether one can be assured that section 17 will be interpreted by the courts as giving blanket authorisation to use electronic form.

10. SECTION 21: Automated transactions

1. Section 21 (a) to (c) confirms the principle that agreements concluded by way of an "automated transaction" will be legally enforceable. Although the JSE believes these sections merely provide statutory confirmation of the common law of contract, the JSE does not object to their retention.
2. However, the JSE strongly objects to the provisions of section 21 (d) and (e) ("the relevant sections").

7. The JSE therefore strongly appeals for the removal of the relevant sections.
8. In the alternative, the relevant sections should only apply as deeming provisions to the extent that the parties have not otherwise agreed. This would require the relevant sections to be moved to Part 2 of Chapter III. The same exceptions as provided for in section 43(2) should also apply.

1. The JSE submits that this section is superfluous and should be removed.
2. If kept, the section could cause interpretation problems as employees of the JSE had two different opinions as to the meaning of the section.

1. General comment:

1. The JSE understands that Chapter IV is intended to allow public bodies to stipulate that the creation, retention or filing of documents pursuant to any law may be done in the form of data messages.
2. Chapter IV does not, however, cover the full range of interactions that a public body is involved in. For example, most public bodies are involved in both receiving and dispatching a large amount of correspondence on a daily basis. There is no specific entitlement in Chapter IV relating to correspondence in the form of a data message.
3. In addition, most public bodies issue more than just permits, licences or approvals. Accordingly, it does not appear to the JSE that Chapter IV is wide enough for a public body to derive full benefit therefrom.
4. It is submitted that the provisions of Section 19 (2) do not remedy this problem, as Section 28 will be interpreted on the basis of the principle of statutory interpretation: expressio unius, exclusio alteris. In terms of this rule of interpretation, the express reference to the one (concept, form or the like) implies that the legislature intended to exclude any other concept, form or the like. Thus, by referring to a "permit, licence or approval", the Bill excludes the issue of other notices or authorities, notwithstanding Section 19 (2).
5. An amendment to Section 28 is therefore required to allow that section to apply to all information transmissions to a public body (including, but not limited to, the existing categories of filing, creation and retention in section 28 of the ECT Bill) and to all information transmissions from a public body (including, but not limited to, the existing categories of issuing permits, licences or approvals).
6. The JSE is not sure whether the notices in the Gazette referred to in section 29 are to be issued in terms of the ECT Bill. If so, can such notices repeal notices or regulations made in terms of any other law?
7. Chapter IV may give rise to various public bodies issuing different specifications and requirements. Government uniformity is essential to avoid confusion and this should be co-ordinated by the relevant parties, including the Department of Communications, the State Information Technology Agency and the Department of Public Service and Administration.

2. JSE-specific comment:

1. The JSE (currently falling within the definition of "public body") already possesses the ability to issue regulations to provide the benefits conferred by Chapter IV by virtue of the fact that the JSE is a self regulatory body.
2. As mentioned above, the JSE therefore wishes to be excluded from the definition of a "public body", as Chapter IV appears to conflict and even limit the ability of the JSE to govern and prescribe the use of electronic media and payment.

13. SECTION 32(2)(d): Restrictions on disclosure of information

13.1 Section 11 of the Promotion of Access to Information Act deals with "Right of access to records of Public bodies" and section 30 of that Act deals with access to health or other records. It is submitted that the reference to section 30 of that Act should be amended to refer to section 50 of that Act because the latter deals with "Right of access to records of private bodies".

13.2 The same comment applies to section 57(2)(d).

 

14. CHAPTER VII: Consumer Protection

3. As the JSE and FSB are most appropriately equipped to deal with consumer protection in the securities industry, the JSE’s authority to create consumer protection rules in respect of electronic transactions should not be interfered with by other legislation that is designed to apply across many different spectrums of commerce. This caveat should also apply in respect of other regulated industries.
4. An example of a specific problem that the JSE has is with section 44: eg section 44 (1) (h): this is not practical as JSE members, not the JSE, are obliged to explain the products to their clients as the members are the de facto link with the clients. Another problem is with section 44 (1) (i): the prices of securities on the JSE fluctuate constantly. This type of information is not provided free of charge by any exchange and thus any client wishing to access it will have to pay for it. Section 44 (1) (n) is also not applicable: one cannot return, exchange or refund shares. Sections 44 (2) to (4) are also not practical in the securities industry.
5. We therefore submit that Chapter VII should be qualified to render the entire Chapter applicable only to electronic transactions where such transactions or the goods and services traded are not regulated in terms of other laws that directly or indirectly provide for or are capable of providing for consumer protection.

13. CHAPTER IX – CRITICAL DATABASES

1. Regulators are tasked with maintaining the stability and veracity of the industries such regulators regulate.
2. Each industry has different challenges and stakeholders that require a sectoral approach to protection of critical infrastructure (e.g. banking, securities, insurance, etc). In the JSE’s case, its licence is dependent on it proving to the satisfaction of the FSB that the JSE has and maintains adequate systems to operate a market and to ensure appropriate disaster recovery procedures and the like. In these issues, the JSE is judged by international standards applicable to global securities markets and we do not believe that it is appropriate for the Bill now to impose an additional and potentially conflicting level of oversight by possibly declaring the JSE to operate a critical database.
3. We therefore submit that Chapter IX should be qualified to apply only to databases that are not capable of being regulated by a particular regulator.
4. Section 58 audits must be subject to the same protection afforded by Section 57.

1. It appears that this sub-section could limit the JSE’s interaction with the FSB and the Securities Regulation Panel ("SRP"), for instance in relation to Insider Trading or other potential market misconducts.
2. An additional qualification should be provided to allow for disclosures to be made in terms of any law.

1. E-commerce is transforming the global marketplace and its impact is being felt across the full range of business and government. As with many other countries the challenge is for South Africa to develop a policy framework and strategy that will optimise and exploit the benefits of electronic transacting. The JSE recognises the efforts of Government to remove barriers in order to create an environment that is conducive to conducting business and sharing information with confidence.
2. However, some of the policies and frameworks set in the ECT Bill are inappropriate to the securities environment, as are explained in the comments set out above.
3. In summary, we believe that our concerns regarding the applicability and/or exclusion of other laws and of the general principles of contract law are of vital importance to constitute legal certainty, and should therefore be attended to. The lack of clarity regarding the Generic Concepts highlighted above and how procedural and evidentiary matters are affected, are particular concerns in this regard. Furthermore, the ambit of the ECT Bill with respect to creating new procedures and protections that affect the way the JSE does business, electronically or otherwise, is a cause of disquiet to the JSE.
4. The major points of concern relate to:

1. Consumer protection. Whilst this must be catered for, this cannot be done without considering the nature of practices and rules that apply to exchanges and thus the JSE.
2. The question of whether or not the ECT Bill overrides other legislation and the common law in certain instances.
3. Advanced signatures: the question of whether or not this is practical as currently drafted in the Bill.
4. Computer Evidence: how this can be simplified and made more rational in a manner which is fair to both the operator of the computer systems and the customer.

Yours faithfully