I wish to refer to certain remarks made by the hon. member for Wynberg during the Committee Stage of the Appropriation Bill last Friday, in which the hon. member criticized the wording of certain short titles of Bills appearing on the Order Paper and referred in this regard to officials of the House.

I have to point out to the hon. member that Bills introduced by the Government are not drafted by officials of this House and such officials are consequently not responsible for the short titles of Bills.

It has always been the practice that any criticism that an hon. member wishes to express in regard to the staff of this House should not be raised on the floor of the House. Members of the staff fall directly under my control and matters relating to such officials should in the first instance be submitted to me, and thereafter, to the appropriate Committee of this House.

I should like to make it clear, Sir, that I was quite unaware that the Secretary of the House had anything directly to do with the drafting of the Order Paper. My remarks were in the first instance directed at the comments of the Secretary for Education about the standard of English in the Public Service. I did not know, and I say so quite sincerely, that the staff of the House were not under the jurisdiction of the Public Service. There was no intention on my part at all to reflect either upon the ability or the integrity of the staff of this House. Had the Chairman made that clear to me during the course of the debate, I would have withdrawn my comments forthwith. Let me say, Sir, that I regret any misunderstanding or distress that might have been caused to any officials of this House.

Mr. Speaker, I move—

The Bill before the House contains important and necessary amendments to the Stock Exchanges Control Act, 1947.

An extensive inquiry into dealings in securities in the Republic was made by a Commission of Inquiry under the chairmanship of the hon. F. N. Broome, former Judge President of Natal. Recommendations made by that commission were embodied in a Bill which was introduced during the first session of Parliament in 1970. After the First Reading of the Bill, it was referred to a Select Committee as it appeared that recent developments made provisions necessary which were not covered by the report of the Broome Commission. The Committee could not complete its inquiry during the short session of that year and was accordingly converted into a Commission of Inquiry under the chairmanship of Mr. W. C. Malan, M.P., to inquire into the amending Bill and to make recommendations for improvements and amendments thereto. The amendments which are now contemplated flow mainly from recommendations made by the two commissions. The opportunity is also taken to tidy up the principal Act by a re-arrangement and reformulation of some of the existing provisions.

The only stock exchange in the Republic, the Johannesburg Stock Exchange, is a very important link in the financial structure of our country. Fundamentally, it is the market place of risk capital and therefore it is of national importance that stockbroking in the Republic should be maintained on a sound footing. Special care should be taken, however, to ensure that measures which are applied to a stock exchange do not harm the free interplay of supply and demand. From this it should not be concluded that all control measures have an adverse effect on stockbroking business. Experience of the major stock exchanges of the world has shown that effective measures of control and strict financial discipline are necessary for the maintenance of an efficient stock exchange and for the advancement of sound stockbroking practices.

Excessive trading in stocks and shares on the Johannesburg Stock Exchange which culminated during the first half of 1969 revealed shortcomings in the existing measures to control dealings in securities, and the amendments which are now being introduced, have as one objective the correction of these shortcomings. The amendments affect the stock exchange as an institution, its members, buyers and sellers of securities and companies of which securities are listed on a licensed stock exchange.

I should now like to draw the attention of hon. members to the more important amendments contemplated by the Bill. The first of these amendments are the measures which are introduced in the principal Act by clause 3 to strengthen the control of dealings in securities in the Republic. The new section 2 which is inserted by this clause into the principal Act restricts the right to carry on the business of buying and selling securities of companies and institutions in the private sector to members of a licensed stock exchange. An exception is made in the case of merchant banks.

Merchant banks render essential and specialized services and fulfill an important role in connection with the reconstruction of companies, take-overs or mergers and also in respect of the administration of investment portfolios of clients. These are important services in the financial sector and make the buying and selling of securities an integral part of the business of merchant banks. The amendments which are now proposed allow merchant banks to carry on the business of buying and selling securities outside a stock exchange but within the limits and on the conditions laid down by the Registrar of Financial Institutions.

It was seriously considered extending the concession which is now being made in the case of merchant banks to other classes of institution. Such an extension could have an undesirable effect on an orderly market seeing that it could open the door to large-scale uncontrolled dealings in securities outside a licensed stock exchange. The establishment of such an uncontrolled market will not be in the public interest. In the circumstances the concession is confined to merchant banks only.

Dealings in securities on the stock exchange take place mainly in securities of companies and other organizations in the private sector. The authorities are very desirous of improving the market for securities of the public sector and institutions such as merchant banks and discount houses have for years been interested in developing an active market in Government and semi-Government securities. Clause 3 of the Bill now permits a broadening of dealings in quoted gilt-edged securities by allowing merchant banks, discount houses, the Public Debt Commission and other approved persons, in addition to stockbrokers and public bodies which issue such securities, to carry on for their own account the business of buying and selling such securities.

The measures which are introduced to control the dealing in securities do not affect transactions in securities outside the market which are of a more or less isolated nature and the amendments make it clear that a person is not regarded as carrying on the business of buying and selling securities unless it is a regular feature of his business to buy and sell securities for his own account or on behalf of other persons and unless he holds himself out to the public as a buyer and seller of securities.

I now come to the measures which this Bill will insert into the principal Act in connection with the membership of a stock exchange. The existing Act prohibits, since 1st January, 1951, a corporate body from becoming a member of a stock exchange. At the lime the prohibition was introduced four companies were members of the Johannesburg Stock Exchange, namely—

1. (i) Barclays Bank D.C.O.;
2. (ii) National Board of Executors Limited;
3. (iii) Sagit Trust Company Limited; and
4. (iv) Syfret’s Trust Company Limited.

These four corporate bodies retained their membership and are still members of the Johannesburg Stock Exchange. Barclays Bank is a member in name only as the bank does not actively carry on the business of a stockbroker. The other three members are actively engaged in the buying and selling of securities on behalf of their clients. The amendments which clause 11 of the Bill now introduces into the principal Act retain the prohibition on the further admission of public companies as members of a stock exchange and propose the termination of the membership of the four existing company members as from 1st July, 1978.

The proposed termination of the membership of the company members is one of the matters on which there was no unanimity among the members of the Malan Commission. All the members of that commission agreed, however, that the existing prohibition on the further admission of public companies as members of a stock exchange should be retained. The majority of the members of the Malan Commission were in favour of terminating the membership of the four company members as soon as possible. A minority of the members of the commission were in favour of allowing the four companies to retain their membership. Such a concession would create an untenable position seeing that it would accord the company members a permanent and protected advantage over all other companies. If the principle is accepted that the admission of public companies as members of a stock exchange is not in the public interest, then it is only reasonable that the principle be applied to all public companies, including the existing members.

I have already referred to the fundamental role of a stock exchange in the financial structure of a country. Consequently, it is a matter of national importance that developments which could endanger the freedom of such an exchange should be warded off timeously. In this regard cognizance must be taken thereof that in the event of the doors of the Johannesburg Stock Exchange being opened for membership to public companies, that Exchange could soon be dominated by its company members and control thereof could pass into the hands of large and influential financial institutions. A company controlled exchange could reduce share-dealing in the Republic to the position obtaining in some of the continental countries where there is not much of a share-owning public and where listed securities are owned mainly by large financial institutions. Such a development would not be in the public interest.

One of the foundation stones of a stock exchange is the requirement that members should carry on the business of buying and selling of securities independently and in competition with each other. In the case of company membership this very important requirement can be undermined through crossholdings of their shares by such companies.

The three existing company members which are actively engaged in stockbroking are also very closely associated with banking institutions. This tie-up with a credit grantor is regarded as highly undesirable by the monetary authorities from a control point of view.

Mr. Speaker, it is fully realized that great caution should be exercised before vested rights are terminated. The four companies have been members of the Johannesburg Stock Exchange for many years and it is not an easy matter to terminate their membership in this manner. At the same time sight must not be lost of the very privileged position which these companies have enjoyed since the amendment to the principal Act in 1951 closed the door to exchange membership permanently for other public companies. In fact, since 1934 the rules of the Johannesburg Stock Exchange have prohibited other public companies from becoming members of the Exchange, In other words, for more than 30 years the existing company members have had the protection of the Rules of the Exchange against competition from other corporate bodies. Such a state of affairs cannot be allowed to continue.

It is realized, however, that considerable problems will be created if the membership of the companies is terminated immediately. Therefore, the amendments which are now introduced will allow the company members a period of 7 years before their membership is terminated. This very liberal concession should enable these companies to develop their business into other fields. However, during the period of 7 years the companies must comply with the provisions of the Act and the rules of the Exchange. In view of the great financial advantage enjoyed by the company members over the past decades and the concession now granted which allows the companies to continue their stockbroking business for a further period of seven years, no further compensation is recommended for the termination of their vested rights.

Hon. members will probably recall that the Companies Act was amended some time ago to provide for a new kind of private company, namely a company whose directors together with the company, bear jointly and severally, unlimited liability for the debts of the company. The amendments now proposed will make it possible for stockbrokers to carry on their business in the form of a private company which will ensure continuity for broking firms which is in the interests of a sound stock market. The shares of such a company will be held by stockbrokers only and all the shareholders will be deemed to be directors of the company. Consequently, the company together with the shareholders, will be liable for its debts.

A further important provision with regard to exchange membership which is introduced into the principal Act, is the restriction which the proposed new section 8B places on the admission of natural persons as members of a stock exchange. The restriction contemplates that South African citizens only should be allowed membership of a licensed stock exchange in future and that the membership of existing members, who do not comply with this requirement at present and who do not become South African citizens before 1 January, 1975, be terminated on that date.

I should now like to direct the attention of hon. members to the more stringent financial requirements with which stockbrokers will have to comply. The measures which clause 12 introduces into the principal Act in this connection, increase the amount by which the assets of a stockbroker must exceed his liabilities from R10 000 to R20 000. In the case of partnerships or private companies the Bill similarly strengthens the financial requirements with which such stockbroking firms will have to comply. Existing members of the Exchange are given until 31 December, 1974, to comply with these requirements.

Apart from the financial requirements with which individual stockbrokers and stockbroking firms will have to comply, the Malan Commission recommended that a stock exchange should also establish and maintain a fund with unlimited liability to indemnify the public against losses where a stockbroker’s assets are insufficient to satisfy in full his liabilities in connection with securities transactions.

With regard to transactions in securities, it is of the utmost importance that adequate measures be introduced by the Exchange to safeguard investors and to protect the public against losses which may arise from the insolvency of its members. I am pleased to be able to state that the Committee of the Johannesburg Stock Exchange realizes this responsibility and that it has already taken the following steps to accord the public the necessary protection:

1. (a) Fidelity insurance which ensures cover to the extent of R500 000 in respect of any one failure of a stockbroking firm due to the misappropriation of scrip, is in force.
2. (b) The Regulations of the Exchange make it incumbent upon every broking firm to effect, on behalf of its staff, insurance of at least R20 000 to cover the loss of securities, cash, cheques and revenue stamps and to indemnify a stockbroking firm against stolen or forged securities or documents. Many firms hold cover in excess of R20 000.
3. (c) The Stock Exchange Regulations prohibit a stockbroker from repledging any scrip pledged to him by a client as cover in terms of the minimum cover requirements of the Act. Stockbrokers may accordingly now grant carrying facilities to the public only from their own resources. This measure was introduced by the Exchange after publication of the recommendations of the Malan Commission.
4. (d) The Exchange’s Regulations will further limit all risk operations conducted by a broker (including carrying transactions) in relation to his available liquid assets and require regular disclosure of the position to the Committee, which means that in a falling market or with a particular drop in a share price or prices the position of a broker can be assessed timeously by the Committee so as to avoid any loss to clients. This measure is now in the course of being introduced.

The safeguards for investors now provided by the Exchange differ from that recommended by the Commission. It would appear to be doubtful whether members of the Exchange would be able to comply, in the foreseeable future, with the proposal to establish a fund with unlimited liability. The recommendation put forward by the Malan Commission has, therefore, been adapted by making it a requirement in the proposed section 13C that the Exchange must establish and maintain a fund to the satisfaction of the Registrar of Financial Institutions. The amount which the fund will contribute if a member’s own assets are insufficient to satisfy his liabilities which arise out of securities transactions, must be laid down in the rules of the fund.

The present Guarantee Fund holds assets of approximately R300 000. The fund discharges, after excursion of a stockbroker, his liabilities arising out of securities transactions up to an amount not exceeding R6 000. The Stock Exchange contemplates increasing the liability of the new fund to at least R100 000 per insolvency and to build up the assets of the fund to a substantially greater amount. In this way the fund can be strengthened gradually to achieve, together with the safeguards initiated by the Exchange, the object of the Malan Commission’s recommendations.

A matter which is of great public importance are the requirements for listing which a stock exchange lays down and which must be observed. In the past the Johannesburg Stock Exchange granted listings without having reserved to itself the right to supplement or amend the conditions on which such listings were granted. Companies in respect of which listings were granted before the shortcomings of such a procedure were recognized, are accordingly completely exempt from the stricter requirements which have been prescribed by the Stock Exchange subsequently. This state of affairs is undesirable and is now corrected by clause 14 by the introduction of a proposed new section 9A in the principal Act which empowers the committee of a stock exchange to amend from time to time the conditions on which a listing is granted. It is, however, provided that the conditions relating to the existing capital structure of a company and the voting rights of the owners of shares represented by such capital may not be changed.

The existing provisions of the principal Act empower the committee of an exchange to suspend the listing of securities or to remove securities from the list of a stock exchange. A committee should have all the facts at its disposal before taking such a decision. In order to make this possible the proposed new section 9B, which is also inserted in the principal Act by clause 14, provides that where an exchange proposes to terminate a listing, the person who issued the securities concerned should be given the opportunity of making representations to the committee in support of the continued listing of the securities. The proposed section also contemplates that the president of a stock exchange should have the authority to suspend the listing of a security for not more than 30 days. Against such suspension the issuer of the relative securities will not have the right of appeal to the Appeal Board but he will have such right in the case of a removal from the list.

The last amendment which clause 14 makes to the principal Act is the insertion of a proposed new section 9C. The object of the provisions of this section is to ensure the timeous disclosure of information which may affect the price of listed securities. The president of a stock exchange is empowered to request a listed company to make full disclosure, to the registered holders of its securities, of information which, in the opinion of the president, would be in the public interest. It is realized, however, that there could be circumstances where disclosure of information to a president of an exchange or to the holders of securities might not be in the interests of a company at a certain stage. In such event the company can by-pass the president by furnishing the information called for to the Registrar together with the reasons why it should not be disclosed to registered holders of securities. The Registrar must then decide whether the information is to be disclosed or not. Furthermore, the section provides that information disclosed to registered holders of listed securities and which may affect the price of such securities, must be made available at the same time for immediate publication to the press and the president of the stock exchange concerned.

In view of the statutory powers which the president of a stock exchange will have and the nature of the information which may be disclosed to him from time to time by listed companies, it is considered to be in the public interest that he should not be actively engaged in the buying and selling of securities during his period of office. It would be unfair, however, to require a stockbroker to sever entirely his relationship with his broking firm when he is elected President of the Exchange and for that reason it is provided that the president may be remunerated by the Exchange and that he may have a financial interest in a broking firm as owner, a partner or a creditor thereof.

Mr. Speaker, I now come to one of the most important provisions of the Bill, namely clause 18 which substitutes section 13 of the principal Act. This new section prescribes the period within which the buyer of securities must pay therefor as well as the period within which the seller of securities must deliver the securities sold and also the steps which a stockbroker must take if a buyer or seller fails to pay for or deliver securities within a prescribed period.

Hon. members will recall that during the boom on the share market of 1968 and early 1969, it became evident that the main problem in our market was the delay in the delivery of and payment for shares traded which resulted in a large amount of unofficial credit. I want to touch briefly on the measures which are being introduced to correct these shortcomings. The existing section 13 prescribes a period of 30 days during which a buyer of securities must pay the stockbroker for such securities or during which such buyer must furnish minimum cover for securities bought. Apart from the fact that this provision was not observed during the boom period, experience has shown that this period is too long and accordingly it is proposed that it be reduced to seven business days. Exceptions are made in the case of corporate bodies whose assets exceed their liabilities by at least R1 million who must pay against delivery of securities and also where a buyer arranges with a registered banking institution to pay for securities against delivery thereof.

Where a purchaser fails to pay or to furnish minimum cover for the securities purchased within the prescribed period the provisions now introduced require a stockbroker to sell the securities so purchased, for the account of the purchaser, as soon as is reasonably possible after expiry of a further period of seven business days from the last date on which payment should have been made or minimum cover furnished. Basically similar measures are also applied in those instances where the purchaser is a corporate body and where payment is to be made by a banking institution on behalf of a purchaser.

I would now like to explain briefly the measures which will apply to the sale of securities. The provisions proposed by clause 18 differentiate between two types of sales, namely a bear sale and transactions where the seller is the owner of the securities sold or where he is entitled to become the owner of such securities.

Hon. members will recall that in many quarters there was strong agitation against bear sales, especially when the prices of securities declined sharply during the second half of 1969. Bear sales are, however, allowed on the major stock exchanges of the world and this form of stockbroking serves a useful purpose provided it is controlled effectively. One of the most important pillars of such control is the requirement that a bear sale should be disclosed by the seller before the transaction is entered into. In addition, the seller should deposit with the stockbroker, before a sale is concluded, funds or securities to provide minimum cover for the value of the securities to be sold. Provision is made in the new section for these measures of control. The price at which a bear sale is concluded is also of importance. The measures which are now introduced require a stockbroker to transact a bear sale at a price which shall not have the effect of depressing the price of the share. Measures similar to those contemplated for the purchase of securities are applied to the selling of securities by a person who is the owner thereof or who is entitled to become the owner thereof.

The financial requirements with regard to credit transactions are further tightened by making it a requirement that full minimum cover must be maintained continuously by a purchaser to whom a stockbroker has granted credit and by the seller who has concluded a bear sale. Coupled therewith is the power granted to the Minister to change the percentage basis on which the value of listed securities of institutions in the private sector is determined for the purpose of minimum cover. The purpose of this provision is to regulate credit, granted by brokers, when exchange prices rise or fall sharply. The Bill makes it an offence if payment for securities purchased is not made within the period prescribed or against delivery thereof and if securities sold are not delivered timeously.

The measures for the control of share-dealing proposed in the new section 13 are from the very nature of stock-market practice and custom of a delicate and very technical nature and extraordinary care had to be taken not to make an arrangement which would disrupt matters and not be capable of practical application. I am satisfied that we have worked out to the best of our ability an arrangement which is practical and which contains the balanced approach to the problem which is necessary in the circumstances.

As in the case of other legislation which applies to financial institutions, the Stock Exchanges Control Act is administered by the Registrar of Financial Institutions. Accordingly the amendments contemplate that the Registrar should exercise certain duties and that he should be granted the powers which are necessary to carry out such duties. He will be in a position to gain a much more direct insight into the control of the share market. He or his representative will, for instance, have the right to attend meetings of the committee or any sub-committee of the Stock Exchange and to take part in all the proceedings at such meetings. He will also have the right to initiate and to effect amendments of the Rules of the Stock Exchange. The Registrar will carry out his duties under the control of the Minister of Finance and subject to appeal to the Minister.

I wish to inform the House at this stage that I shall move an amendment to clause 31 at the Committee Stage. I have received strong representations to the effect that the proposed new section 21B which requires certain written matter to bear the names of certain persons, will in one respect virtually be incapable of application and in another respect very little, if anything, would be achieved by endeavouring to apply the proposed provision. The scope of the provision as it now reads is not restricted to written matter containing comment only, which appears to have been the original intention, but covers also all factual statements of which a great many continuously appear in the Press. It seems to be necessary, in the first place, to restrict the scope of the provision to comment to which the undesirable features which the provision proposes to counter normally attach. Secondly, it would appear to serve little purpose to require the authors of such comment to disclose whether or not they own directly or indirectly any shares in a company which may be concerned since the ownership of shares may easily be shifted or avoided which will make such a requirement ineffective and it may even cause the public to be misled. The amendment which I shall propose will obviate these difficulties and will be directed towards the avoidance of anonymity on the part of the authors of comment or the non-disclosure of the source of comment which may affect the price of securities.

I have now dealt with the more important provisions of the Bill. As mentioned in my introductory remarks, this Bill is in substance the outcome of recommendations made by the two commissions of inquiry. The corrective measures which are introduced by the Bill are urgently needed to instil confidence in the Stock Exchange and to ensure the maintenance of a well- organized Exchange and a sound and reliable stock market for the community as a whole.

Because of the very technical nature thereof and also because of the many conflicting interests which had to be reconciled to the best of our ability, this proposed legislation was very difficult to draft and a tremendous amount of consultation, time and effort went into the preparation thereof. At this stage I should like to thank the members of the two commissions of inquiry and all the others whose willing co-operation we have had for their valuable services and contributions towards the preparation of this draft legislation. I think we can be reasonably confident that when we have this measure on the Statute Book we shall have legislation which will be effective and which will serve its purpose well of ensuring sound share dealing in this country in the interests of our economic development.

Mr. Speaker, we agree with the hon. the Minister that this Bill before us is one of the greatest importance. Because that is the case, we will support the Second Reading of the Bill. However, we do so, not because we believe the Bill is completely satisfactory, but because we believe that it is in the interests of the public that certain of the provisions of the Bill should be placed on the Statute Book, at the earliest possible opportunity.

This is the third Bill on this subject that has come before the House. The first Bill was originally introduced by the hon. the Minister. The second Bill was recommended by the Commission. Now we have the third Bill, the one before us, which represents the Government’s views on the subject. This Bill differs from that of the Commission in a number of fundamental aspects. I believe that the Bill of the Commission was a better Bill. I believe that the major changes to that Bill that are now proposed, are not completely satisfactory. The task of the commission was to produce a Bill that would take full cognizance of the rights and interests, and try to weigh the balance between, the public, the Stock Exchange and the stockbrokers and other interested parties, such as banks, merchant banks, insurance companies, and other financial institutions. I believe that the Bill which the commission produced and which was unanimous, except in two respects, achieved this balance. I believe that the Bill which we now have before us is weighted in favour of the Stock Exchange and the stockbrokers, and I believe it is prejudicial in a number of respects to the legitimate rights of others, particularly the rights of the public.

I first want to deal with some of the important clauses of the Bill which we on this side of the House support either wholly or in part. The first is clause 3, amending section 2 of the principal Act. This is the clause which, amongst other things, restricts the right of buying or selling securities. As the hon. the Minister has told the House, the individual right of one person to sell his securities to another person is not interfered with, but the selling by people of shares as agents and by so-called “bucket shops” is now controlled or completely prohibited. We go along with a lot of this thinking. We believe that there was a necessity to control a great number of the transactions which are taking place outside the Exchange. In the commission's Bill, merchant bankers or an institution approved by the Registrar on such conditions as he may determine could buy and sell securities outside the Stock Exchange for the purpose of, firstly, reconstructions, takeovers or mergers as between two companies, secondly, take-overs for the purpose of control, and thirdly, establishing or changing portfolios administered for clients. There were these three provisos. In the Bill before us these rights are taken away from institutions. The hon. the Minister has told us in his speech that institutions are no longer being granted these rights, and the rights of the merchant bankers are being made subject to the conditions that the commission’s Bill provided for institutions. The rights of the merchant bankers in terms of the commission's Bill were free and unfettered.

What is the net result of these changes? It is to ensure that a certain number of transactions which are taking place at the moment outside the Stock Exchange will in future have to be routed through the Stock Exchange. We regard this as an unwarranted interference with the rights of others. The hon. the Minister has said that we would arrive at an uncontrolled position. Sir, we do not believe that this is the case. We do not believe it at all. There was nothing in the evidence, as far as we are concerned, which was submitted to the Commission which gave any indication whatsoever that the position was becoming uncontrolled. If the Bill had remained as proposed by the Commission, whereby the merchant bankers were given a reasonably free hand and the institutions were entitled to deal in shares, subject to such conditions as the Registrar would lay down, there would have been adequate protection for everybody without unnecessarily taking rights away from people.

There are. for example, insurance companies that handle pension portfolios. They now have to go through the Stock Exchange if they want to buy or sell shares for their portfolios. That is completely unnecessary. We have heard from time to time that brokers were going to make special arrangements for their commission in regard to these large transactions, but there is nothing in the Bill, nor have we heard anything further about it. I would like to know from the hon. the Minister whether, if this provision is put into practice, he has ensured from the Stock Exchange that special rates of brokerage are going to be charged by brokers in regard to these large transactions. We do not like it. We do not believe it was necessary. We believe it is unnecessarily taking away from people rights which we believe they should have.

Clause 10, which amends section 8 of the principal Act, deals with the rules under which the Stock Exchange will in future operate. Now, this is one of the vital clauses of the Bill, because it gives the Registrar far-reaching powers to exercise some control over the Stock Exchange. The clause provides that the rules must ensure that they cover the matters which are set out in the Bill, in this clause; that the stockbroker cannot knowingly buy or sell securities from or for a client without notifying the client in writing that he is so doing. This is a provision which everybody will welcome, because unfortunately, rightly or wrongly, it has long been said that brokers themselves buy from their clients and sell to their clients, and if they now knowingly do so they will have to notify their clients. This clause provides that a stockbroker’s charges must be reasonable and that generally the business of the Stock Exchange is to be carried on with due regard to the public interests, The public is now going to get a modicum of protection. The Registrar must approve of these rules.

The Registrar is also given additional powers; no additions or alterations to the rules may be made unless approved of by the Registrar, and the Registrar may, after consultation with the committee of the Stock Exchange and with the consent of the Minister, amend or add to or rescind the rules. This we regard as being a large degree of protection for the public, Here there has been an amendment to the commission’s Bill in that there must now be consultation with the committee of the Stock Exchange. This we accept; we regard it as being reasonable.

We support this clause except in two aspects, and that is in respect of paragraph (g) on page 18 of the Bill which says that the rules must provide that the membership of a member who is a stockbroker is not terminated on any grounds as to which he has not had an opportunity of making representations to the committee, and that a member who so made representations shall be entitled to be supplied with a copy of a record, etc. In the commission’s Bill we had a proviso to the effect that the membership of a member who is a stockbroker shall not be terminated on any grounds as to which he has not had an opportunity of making representations either personally or through a legal representative. The right to employ a legal representative is removed in the Bill before us and we regard this as being wrong. Where a man’s membership is at stake, in other words, where on the resolution of the Stock Exchange committee he can cease to be a member of the Stock Exchange and his livelihood can be taken away from him, we believe, although he has the right of appeal, that it is basic that ab initio he should have the right of legal representation. I believe that this is the case in most professions; lawyers, doctors and accountants, for example, have the right to legal representation. In the case of a stockbroker, who is not a legal person—to a large extent he is an untrained person—we believe that he should have the right to be represented by his lawyer.

We then have another provision, paragraph (m) on page 20, which has to do with the president and which was dealt with by the hon. the Minister. In terms of this clause the president may not himself buy and sell securities on behalf of other persons. In our Bill we provided that he should not carry on business as a stockbroker. Perhaps We went a little too far when we said that he should not carry on business as a stockbroker, because you run into problems where you have a one-man business. But, on the other hand, I think the hon. the Minister has gone too far the other way, because as I read this clause it is now completely meaningless. It is now provided that he must not himself buy or sell securities. What does this mean? Can he instruct his staff or his partner to do so? It simply means, as we read this clause, that he physically cannot buy or sell, so it has no meaning whatsoever. We are prepared to leave this in as a moral guide as to what presidents of the Stock Exchange should or should not do and perhaps as an indication that there was and is a feeling that the whole position of the president of the Stock Exchange has got to evolve until one day perhaps the president will be a completely independent person and not a stockbroker. Sir, there was another provision where an important change has been made, and that was the provision in the commission’s Bill that a stockbroker could not be a director of a listed company. This provision is no longer in the Bill, and as my colleagues, the hon. members for Pinetown and Jeppes, and I objected to this provision at the time of the sittings of the commission, we are very happy to see that the hon. the Minister has taken our advice in this matter.

We now come to clause 11, which introduces a new section 8A and which is one of the contentious clauses of the Bill. This clause—and it was dealt with fairly fully by the hon. the Minister—provides that no corporate body shall after the Bill becomes law, become a member of the Stock Exchange and that a corporate body that is at present a member of the Stock Exchange shall cease to be such a member from 1st July, 1978.

As the hon. the Minister said, this does not apply to the newly incorporated companies. The commission recommended that no new companies should be able to become members of the Stock Exchange but in so far as existing companies were concerned the commission by a majority decision decided that those companies who were members should cease to be members at the date of the Bill becoming law but that they should continue to earn brokerage for a period of seven years thereafter.

This Bill changes things slightly in that these companies remain members of the Stock Exchange until 1978, to 1st July, earning commission up till then as they do now. Only thereafter will they cease to be members. From a financial point of view there is little difference as far as these companies are concerned because they will get the same amount of brokerage in any case. The minority members of the commission—my two colleagues and myself— took the view that these three companies and the banks should continue to be members of the Stock Exchange. The decision now taken is going to affect Barclays Bank and the three trust companies. These trust companies have been members of the Stock Exchange for 83 years, 54 years and 52 years respectively.

That is a long time and as the Minister rightly says, but wrongly acts, it is difficult to take away rights that people have had for so many years. The majority view of the commission, and apparently the view of the Minister, is that if one allowed these companies to remain members of the Exchange, at some point of time in the future you are going to have to allow other companies to become members. You will not be able to resist the pressure. The Minister, however, gave us the answer. Companies have not been allowed to become members of the Stock Exchange since 1934—37 years now. There has been no pressure and there has been no excitement. Everybody got on very nicely. Why now all of a sudden take the point of view that at some point of time in the future you will not be able to resist the pressure? And if you cannot resist the pressure and companies become members of the Stock Exchange, the Minister says the control of the Exchange is likely to fall into the hands of powerful companies and that it will be far more difficult then to control the Exchange than is possible with personal brokers.

We reject this entirely. We believe it is absolute far fetched. Up till now there has been no interference in the Exchange by the three companies concerned. The Bill provides that other companies cannot become members. What therefore is the danger to the Exchange? We have resisted the pressure from other people for years now; why should we not be able to resist the pressure also in future? We do not believe that the retention of existing rights by present member companies will lead to the Stock Exchanged being controlled by companies instead of by individuals. In any case, if South Africa is going to follow the pattern that is taking place in the rest of the world, the Stock Exchange is going to have companies to provide the capital that is necessary to run stockbroking operations on a proper basis. That is happening in the United States, for instance, as the hon. Minister knows.

This will be so particularly now that stockbrokers cannot pledge clients' shares. We are vehement in our belief that no right enjoyed by any person, institution or company ought to be taken away from him or it unless it can be shown that these rights have been abused or that it is clearly in the public interest that these rights must be taken away. In our view neither of these criteria has been shown to exist; in fact, the very opposite is the case. These three companies have built up a reputation over the years as institutions of the highest efficiency and integrity. Far from abusing their position, and let me make it quite clear that nobody ever suggested that they were abusing their position, these companies in their stockbroking sections have created research and management facilities which are equalled in very few cases by stockbroking members of the Stock Exchange. We can find no valid reason at all for the introduction of this new section 8A. It was suggested to us in evidence that similar action had been taken when the Motor Vehicle Insurance Fund was set up. It is true that such action was taken because a consortium was formed in which only ten or twelve, I think, of the existing seventy companies that did motor vehicle insurance were allowed to become members. We protested at the time that this constituted an unfair taking away of rights and exactly the same principle applies here. We believe it is wrong if people have rights which they have not abused and if it is not clearly in the public interest that those rights should be taken away. We will never vote for such an action and we are not going to do so in this case. We do not believe that the rights of these companies should be interfered with in any shape or form.

Next we come to clause 18, which amends section 13 of the principal Act, read together with clause 19, which introduces a new section 13C, and clause 40, which amends section 27. This, as the hon. the Minister has said, is perhaps the most important section of the Bill. These clauses in the commission’s Bill were recommended unanimously by the Commission after days of study. The clauses, as they appear in the Bill before us, differ fundamentally in principle from the commission’s Bill. Clause 18 deals with the buying and selling of securities, whether for cash or credit, with bear sales and with minimum cover. In brief it provides that, if one buys shares, one must pay for them within 14 days and, if one fails to do so, one’s broker must sell one out within 60 days. If one sells shares, one must deliver the shares to the broker within 14 days after one has been advised that the shares have been sold for one and, if one fails to do so, the broker must buy against one within 60 days. This is what happens in the case of cash transaction. As far as credit sales are concerned, very much the same applies but the regulations are in regard to minimum cover that must be provided in terms of the Bill. These stringent requirements were recommended by the commission because, as the hon. the Minister rightly says, in the débâcle of 1969 we believe that the position was that the unlimited credit being given by brokers—or if not being given by brokers, being taken by clients—aggravated the debacle. It was felt that, to ensure orderly operation of the Stock Exchange, shares should be paid for within a reasonable time, which we assess at 14 days. However, we were faced with one major problem: We regarded as basic to our law of contract that, if one has paid for something, one is entitled to get delivery against payment unless one has agreed otherwise. We do not deviate from this point of view today. If a man is required by law to pay his broker for shares, he is entitled to get delivery of those shares against payment unless he agrees otherwise or unless his payment is fully secured. The provisions the commission wrote into the Bill ensured that he was fully secured. What we wanted for the security of the buyer was a fund with unlimited liability to be set up by the brokers and, if the fund could not meet the liability of any broker fully, the other brokers were to be fully liable for the misdeeds of their colleagues or ex-colleagues. The Bill before us retains the obligation imposed on the buyer or seller of shares to pay for or deliver his shares within the specified time of 14 days, but the provisions to secure him against possible loss have now been watered down to an extent that, in some regards, they become meaningless. The hon. the Minister has dealt very fully with the policy of R500 000, the fund and so forth As regards liability the fund is no longer unlimited. The limit of the amount will be specified in the rules. Parliament does not know what will be in the rules. It is the responsibility of Parliament to see that people are protected and that our common law is not changed. Other brokers are no longer liable for a defaulting broker. The Minister “may" make regulations to safeguard a buyer's money. The Bill does not even say that the Minister shall make regulations; it says that he may do so. What does “may” mean? It means nothing. We find these provisions completely unacceptable. They are far less than the minimum requirements laid down by the commission. They, by law, force a person to part with his cash, at the same time leaving him unprotected.

It has been said, I understand, that only one broker has been hammered since the war. It is a case of two or three months ago when a broker was hammered in terms of the Stock Exchange rules. He went insolvent and could not meet his obligations. We accept that this is the position, namely that since the war the brokers have carried on admirably and have always met their commitments. Apparently brokers take the line that they are completely satisfied that their stock-broking members will always meet their commitments or, if they do not, they regard the fund, which now stands at R300 000 and the policy of R500 000 as being sufficient. Incidentally, I am not sure whether this policy is a good one, because I believe you have to take criminal action before you can call for payment under it. My answer to the hon. the Minister is that if the Stock Exchange believes that there is sufficient security for the public, let the members of the Stock Exchange take the risk. They are saying to the public that the public has nothing to fear and that everything will be all right. Let them take the risk and responsibility; let them be fully liable for the obligations of their fellow members, but give the public full protection. We believe it would be quite wrong if we, as a Parliament, were to destroy the fundamental basis of our law by saying to the public: “You will pay, but whether you get your shares or not is just too bad. Somebody will make some rules and regulations to take care of these matters.”

It is a pity that we have had these changes, because I believe our Bill was a much better one. There are other clauses in the Bill which are very important and which are very satisfactory. There is the question of fluctuating minimum cover. It is a very essential provision. There is the question of stopping manipulative practices. This is very important. There is also the provision dealing with the controlling of publications. The hon. the Minister will move an amendment in this regard. We will take a look at it later. Therefore, we will vote for the Second Reading, but we will oppose those matters to which I have already referred.

I would like, before sitting down, to pay my tribute to the chairman of the commission, the hon. member for Paarl, who did a very good job under very difficult circumstances. As the hon. the Minister has said, this is a very highly technical Bill. The hon. member for Paarl kept us in good order and saw that we produced a first-class Bill which, unfortunately, the hon. the Minister has changed. I want to thank my colleagues on the commission on both sides of the House for their cooperation and their attention to this problem. Last, but not least, I want to thank the registrar and the two assistant registrars who gave us so much help. This is the third time that a Bill has been produced. I suppose it would be hoping for too much to suggest that the hon. the Minister should accept our amendments which we will move in the Committee Stage. I think if he did so, he would have a first-class Bill. If he does not, he will have a situation that at least will be better than it is now. No doubt, in the course of time, the wisdom of my two colleagues and myself will be appreciated and as is usual, the amendments to the Bill will come in the years to come.

Mr. Speaker, to a very large extent I agree with the arguments advanced by the hon. member for Parktown this afternoon. I find it rather pleasant to agree with him for a change. Of course, I differ with him in respect of the question of the membership of those three companies, because I believe that it is in the public interest that they should no longer be in this privileged position in relation to all other companies, namely that these three companies alone, and no other companies, will have the right to act as brokers. If the membership of the Exchange were extended to other financial institutions, such as commercial banks and insurance companies, I would have said that there was something to be said for it. But after very thorough consideration the commission decided unanimously that this membership should not be extended to other companies. Accordingly there was only one logical consequence, i.e. that the membership of these three companies had to be terminated. I want to agree wholeheartedly with him that I am not very happy about the changes effected in the original section 13. I would have felt very unhappy if they had been effected just like that. However, there is one subsection that I find reassuring, i.e. the new section 8 (1) (I), as inserted in terms of clause 10 of the Bill. It provides that a member who is a stockbroker shall every week make a report in writing to the Committee in which particulars shall be furnished of such transactions as our outstanding. I still think that that period of 60 days is far too long.

As the Minister gave such a detailed explanation of the Bill, it is not my intention to cover the whole Bill again.

†However, it is my esteemed privilege to thank the members of our commission, as well as the Registrar of Financial Institutions and his staff. Then I want to say a special word of thanks to the commission’s very able secretary. He was tops indeed. All the members of the commission, including the three members from the Opposition, gave of their very best. I want to assure them all of my sincere appreciation. I also want to express my sincere appreciation for the contributions of all those institutions and individuals who gave evidence before this commission. Quite a number of people reacted to the commission’s open invitation to submit evidence by writing or personally. Much of this was very valuable. Such co-operation spells democratic government at its very best. I would be ungrateful if I did not mention three names of the Johannesburg Stock Exchange Committee. I am thinking of Mr. Alistair Martin, the immediate past president, Mr. Max Borkum and Mr. Richard Loury, the present president and vice-president respectively. They have been very helpful indeed, and I want to thank them sincerely. Thirdly, I wish to thank those journalists who took the trouble of making a thorough study of the commission’s report. I wish to thank them for positive criticism. Unfortunately, this cannot be said of all. Especially one editor was insulting to an extreme degree. I say this when I consider the following comment he made. He said—

I do think that this borders on libel. I read another portion from this journal—

First, there is the new section 13, with its demand that brokers must sell out clients if they have not paid cash, within seven days. As we pointed out last week, this just will not work.

I had to reply to this gentleman, and I wrote to him as follows—

I therefore owe the gentleman a disclosure. For this much-maligned section 13 I personally take full responsibility. But I am in good company and I want to read out a paragraph from a letter by a wellknown Cape Town personality in business circles. He wrote—

Of course, we as a commission were fully aware of our “evident lack of knowledge of the detailed workings of the Johannesburg Stock Exchange”, but surely we could weigh the evidence before us. That is why we laid down the principle involved in section 13 only and left the wording to a body of men who do have an intimate knowledge of the detailed workings of the Johannesburg Stock Exchange. Surely we could find no abler body than the committee of the J.S.E. to do this, and this is precisely what we did. The draft of the new section 13 which eventually found its way into the Bill was none other than that of the committee of the Johannesburg Stock Exchange. The Financial Mail says that this new section 13 will just not work. Well, we accepted the draft of the committee of the J.S.E. which is comprised of brokers.

Then there is the provocative new section 21B which provides that journalists will have to disclose their names and state whether they hold any of the shares they are pushing. On this section the same journal had the following comment to make. They first of all said that the section would not work and then went on to say—

That is beautiful and praiseworthy and I wish I could say that of all journals and of all newspapers. I want, however, to read out what a recent member of the editorial staff of this same journal had to say—

That is why we had to include a section to curtail the pushing of shares by these gentlemen. Before this gentleman of the Financial Mail points a finger again at the members of my commission, I would remind him of the old adage that whenever you point a finger at someone accusingly, three of your fingers point at yourself all the time.

*In the financial world of today, with its declining monetary values, the Stock Ex change must necessarily play a progressively greater role in the mobilization of risk capital. Now, it is true that the Stock Exchange, a market for shares, holds an element of speculation, as is the case with any other market. Because of its history, our Stock Exchange may perhaps have an excess of this element of speculation. However, if we want our Exchange to play a fuller role in the mobilization of risk capital, we shall definitely have to make it a more stable market than it has been over the past three years; for if the man in the street, the ordinary investor, has to burn his fingers in an overheated market every time, which was what happened two years ago, he will never enter into the Exchange permanently as an investor. But politically this is also an absurdity, for with every crisis on the Exchange, it is the thousands of small investors who are losing their hard-earned savings, and by whom is that money won? By a few professional speculators. It goes without saying that the latter will oppose any possible change which might lead to their losing their source of unearned riches. It goes without saying that they will call in the assistance of brokers and journalists who grew fat on the savings of uninitiated investors, in order that they may retain their source of easy enrichment. In such a case any change is disparaged as being unpractical and impracticable, as I read out to you from this journal. But have these gentlemen ever come forward with practical, practicable suggestions for changing this unhealthy state of affairs? Oh, no. What angler would deliberately disclose the whereabouts of that secret fishing spot he has, where the fish are still so abundant, and what investor, or what speculator, would give up this wonderful source of unearned riches?

I want to praise the members of the Exchange Committee who gave evidence before the commission, namely three gentlemen whose names I have already mentioned, for having been willing to co-operate. At first they, too, were rather distrustful and also made much of the impracticability of our ideas for bringing about more stability on the Exchange. However, I want to extend my sincere thanks to them for eventually lending us their full co-operation.

Mr. Speaker, I want to emphasize this very, very strongly. This Bill ushers in an entirely new approach to Stock Exchange activities. A stock exchange is a market, as I have already said, where prices are determined by demand and supply, and for that reason there will always be fluctuations. A statue of a bull and a bear fighting which was erected in front of the Exchange building in Johannesburg, depicts this market only too well. But the Exchange may never become a gambling-house; then it will never succeed in channelizing the savings of the people into risk capital. Sir, if, during that tremendous bull phase which we had two years ago, one was told by a certain broker that he had on his books the names of 30 relatively young businessmen who resigned from their jobs in order to speculate on the Exchange on a full-time basis, then it has become late in the day, for in that case it is indeed a gambling-house. A system which allows a person to buy and sell and amass fortunes without having invested a single cent, is no longer an investment institution, but a gambling-house. Everybody who knows anything about Exchange matters, also knows how speculators bought shares without money during the mad bull phase of 1968’69. Then they wait three, four or six months before they have to pay, because the system allows of such a long period elapsing before payment has to be made. When they have to pay after three or four or six months, they simply instruct the broker to sell again, and without having invested a single cent, they then fetch from that broker a sizeable cheque.

Furthermore, everybody knows how the opposite has been happening for the past two years, since June, 1969, when bears sold shares which they never held. They also waited for three to four months and, when they had to deliver that scrip, they instructed the brokers to buy in those shares quickly. Therefore, without having spent a single cent, they too fetched a fat cheque from their brokers. Sir, on the Exchange—and I can never emphasize this strongly enough—no money is created; money is merely made through ingenious manipulation. Every cent and also the hundreds of thousands of rands which the ingenious speculator makes on the Exchange, comes from the pockets, from the hard-earned savings, of the thousands of uninformed, misguided small investors.

On more than one occasion I was asked this question by some of my business friends, “Why are you concerned about those people who are burning their fingers?’’ I want to put it to you, Sir, that this Parliament, the law-makers of the people, well and truly has a duty also towards those who are burning their fingers in ignorance. That is what we are seeking to do by way of the new section 13. Sir, it goes without saying that the legislature can never make a perfectly faultless, watertight Act. it is also for that reason that I do not expect the Bill before the House today to be the alpha and omega of Stock Exchange legislation for many years to come; I definitely expect the practical application of this legislation to necessitate further amendment, possibly very soon, but the principles which we have laid down here, create the framework for orderly marketing, affording the investor the highest degree of stability possible. I can never emphasize this matter strongly enough, Mr. Speaker, for in our fast-growing economy we need a truly vast amount of risk capital. That risk capital is derived from the hard-earned savings of John Citizen, the man in the street. The investor who burnt his fingers because of the skilful manipulation of the professional speculator, will not easily entrust his savings to the Exchange again. He may even go further and argue like this: “If I had rather spent that money which I invested on the Exchange, I would have been much better off; if I had rather invested those savings in a new motor car or a new Persian carpet for my home, I would have been better off; or, if I had rather gone to the French Riviera to spend an extra holiday there, I would have been better off; then I would have had something to show for it; now I have lost my savings because of the skilful manipulation of a few very cunning professional speculators." That is what will happen if we do not protect the ordinary investor on the Exchange, even against his own folly. That is what section 13 seeks to do, i.e. to protect these people, even against their own folly. We, with our fast-growing economy, need that risk capital very urgently. We should do everything in our power to safeguard the investor in order that he may channelize more and more of his savings through the Exchange.

It goes without saying that our measures are extremely unpopular with the professional speculator, with certain writers and even with certain brokers. Let me emphasize this once again: Those who make large sums of money on the Exchange through skilful manipulation, are not creating any wealth, and are quite worthless to the economy of the country. They are making that money at the expense of the thousands of small investors. That is why we are presenting this Bill, and especially section 13, which has come in for such a great deal of criticism, as a sincere attempt at creating the necessary stability for the investor, so that he may once again channelize his savings through the Exchange in order to provide our entrepreneurs with the risk capital they need so urgently. I want to make a very urgent appeal to our brokers. In this Bill we are doing a great deal to protect their interest. Those brokers who are listening, will have heard the hon. member for Parktown saying that he regarded the termination of the membership of these three companies as being unfair. I repeat: In this Bill we are doing an infinitely great deal to protect the interests of the brokers. Let us now obtain from them the necessary co-operation in the implementation of this legislation. If that is done, it can work. In spite of what was said by the Financial Mail, namely that our recommendations were unpractical and impracticable, I believe, and I believe that alt the members of my commission share this view with me, that this Bill can work. If our brokers will give it a fair chance, it will work. If that is done, we shall create the necessary stability, which will once again encourage the ordinary investor and give him the necessary confidence to channelize his savings through this institution, i.e. the Stock Exchange. It is only when we shall have achieved that object, that we shall also obtain the necessary risk capital, which our brilliant entrepreneurs need so urgently. Once we have achieved that object, I foresee great prosperity for the whole of the Republic of South Africa.

Mr. Speaker, I would like to take this first opportunity of expressing my appreciation to the chairman of the commission for his remarks as regards the members of the commission on this side. I associate myself with the remarks made by the hon. member for Parktown with regard to the chairman of the commission and all those who assisted the commission in drafting this Bill.

We support this Bill, subject to the recommendations made in the annexure to the commission’s report; but we want to see this Bill against the background of the 1969 debacle on the Stock Exchange, when millions were lost almost overnight. It was one of the most serious collapses on the Stock Exchange we have seen in recent years. It is against that background that we have to examine this Bill.

What happened? During the early part of 1969, everyone was talking about growth. Growth was the answer. Many of our leading shares were giving a return of ,6 per cent or 1 per cent. People were warned that they would get their fingers burnt. The President of the Stock Exchange warned people; so did the Minister and so did this side of the House. However, people would not take the warning. I would like to be sure that all the brokers took the warning of the President of the Stock Exchange. I have my doubts whether they did or whether they encouraged their clients to go on buying. I certainly do not know of any broker who advised people to sell in the early part of 1969. We warned the Government that those conditions could not continue to exist. Now at the end of the warning period we are looking for scapegoats; we blame the typistes and we blame the clerks—all these little people for going on the Stock Exchange. But it was not only these little people; there were some big people as well, people who went into the Stock Exchange expecting to find a short cut to getting rich while you know as well as I do, Mr. Speaker, there is no such short cut. In most cases getting rich means a long and arduous process. Those who do get rich by taking a short cut, are very few indeed. Some of them crash. This Bill does not guarantee that there will be no more crashes; there is no guarantee that there won’t be any further crashes. It only attempts to improve discipline for the public and the brokers. However, this discipline has to be maintained. That is the essential factor. This Bill, as I say, provides for tighter control but discipline must come from the people themselves, from the broker. He must ensure that he is not encouraging the public to speculate. And not only that. The broker must also ensure that he can handle the business offered to him. He must learn the very important word “no”; when to say no; when to say to his customers who are employing him to buy shares on their behalf, “I am sorry, but I cannot do any further business today”. It is a most difficult thing to say “no”, especially when things are booming. In the boom times there were occasions when the brokers could scarcely handle all the orders given to them and when they could not possibly handle all the orders, it was not very long before the public realized that there was a time lag—of two, three or even four months in some cases. And with this time lag the public saw an opportunity to take advantage. They knew that they could give the order and that it would be two, three or four months before they would have to pay. So they took advantage of this situation, because the broker could not deliver the scrip. So, having taken advantage of the position, they got, as the Minister said in his speech, advantageous credit.

This was due to the circumstances ruling at the time. It was not that any broker would willingly give them long-term credit. The situation on the market, however, was such that they were handling more scrip than the staff could handle. And when a broker handles more scrip than his staff can handle, the way is open for the small operator, the speculator and the gambler. The public too must learn discipline and must realize that they must not buy shares which they cannot afford to hold. Members of the public who regard the Stock Exchange not as a market but as a casino, are going to burn their fingers. It will do this country, nor any other country, no good at all if the Stock Exchange is re-regarded as a casino and not as a market for orderly marketing. Then too, transfer secretaries of companies must realize that they have a duty to perform in that they must see that the transfer of shares from buyer to seller takes place as expeditiously as possible. New times demand new methods. As a matter of fact, mechanized methods have been introduced in recent years. The suggestion has been made during the course of evidence from the Stock Exchange committee that they were considering a scrip bank. With a scrip bank and the aid of computers they would be able to deal with matters far more expeditiously than now. In the meantime, however, it is essential that the transfer secretaries see to it that they have adequate staff to put through share transactions as expeditiously as possible. A delay in effecting transfer or a delay in a broker dealing with the orders for shares, all have their effect on the market. It is necessary that we should remind ourselves that, if we allow conditions to develop where there is a time lag, the discipline breaks down and, when the discipline breaks down, the law breaks down, because it cannot be administered effectively.

We had voluminous evidence from all sections of the community. We invited evidence and both the Stock Exchange and the trust companies had eminent counsel to present their case. Both the stockbroker and the trust companies took the trouble to send their counsel overseas to get the latest information. We had evidence of practice on the continent and in the United States, which was all valuable evidence for us. It is, however, interesting to realize that, while we had evidence from all sections of the community, there was one section from whom we did not receive evidence, namely the financial journalists and financial editors. Possibly they thought that hindsight was better than foresight, and that controversy was better than objectivity. I have sat on various commissions over the last 23 years of which many had to do with finance and can say that it would be a pleasure for once to get financial journalists to give evidence to us and to tell us what we should do. We could probably learn something from their research and their knowledge on these matters. This Bill differs from the Commission’s Bill, as the hon. member has said, and I agree with the hon. member for Parktown that the commission’s Bill is a better Bill. We probably had more time to study it than the hon. the Minister did. I hope that the hon. the Minister has put as many hours into this Bill as we have. The hon. the Minister explained the reasons for making the change to the draft Bill, and we shall query these further, if necessary, at Committee Stage.

I want to deal with the proposed new section 2 (1) (b) (bb). We would like the hon. the Minister to explain the reasons for amending the restrictions on merchant banks with reference to the buying and selling of securities. It appears to us that special restrictions are going to be applied to merchant banks. In other words, the hon. the Minister’s clause on merchant banks differs from the clause in the Commission’s report. We think that the clause in the commission’s report is a better clause and that it can be better justified than the hon. the Minister’s clause which appears in this Bill. I think that the merchant banks provide a service and should not have the restrictions placed upon them by the hon. the Minister, because the restrictions are vague and they do not know what the Registrar of the Stock Exchange is going to impose on them. They are therefore going to be at a disadvantage because the restrictions can be altered from time to time as and when the Registrar deems it advisable.

With regard to clause 10, the hon. the Minister does not accept our recommendations that a member, whose membership is being terminated, has the right to legal representations. In the original commission’s report we say it is fundamental that a man should have a right to be legally represented. In most professions, such as the medical and accounting professions, that is a right. If a man is in difficulties, and must appear before his peers, he is entitled to have legal representation because quite often, although a man may be a first-class stockbroker, he is not a very good man at representing a case since that is not his function. He has not had the training to present his case. He may not present his case well because of his inability to express himself adequately. His counsel, who is trained in the law, knows the importance of taking care of the requirements of the law, and knows how to present his Case, and will therefore be able to present the case far more effectually than would the member before his committee. It must be remembered that we require this in a case where a member is before the committee and his membership is in jeopardy. If he loses his membership he is out for life, virtually for life. He loses his living and I doubt whether there is any known case where a member has been taken off the Stock Exchange where in his lifetime he has been admitted again. It is a man’s living that is at stake and I suggest that fundamental justice demands that where a man’s living is at stake he should have the opportunity of being represented by counsel. We recognize that in the ordinary course. We recognize that as fundamental justice with ordinary civil rights. Surely in this case it is just as important as any civil right. A man should have the opportunity of having legal representation. The commission was unanimous on that. The commission had no doubt on this point. We discussed it at length and we felt that this was essential in that it was fundamental justice. Why the hon. the Minister has decided not to accept the advice of the commission I do not know. I hope the hon. the Minister will give an answer to that and give serious consideration during the Committee Stage to replace his own proposals by those of the Commission. We think it is in the interests of the broker. After all these cases are very rare. It is very rarely that a man is pulled up before the Stock Exchange committee and is placed in a position where his membership is in jeopardy, it is not a daily occurrence. It may happen once a year or once every five or ten years. The matter is so serious that even a whisper that a man is going to be brought before the committee gets round and it is quickly known in circles that so-and-so is to be brought before the committee, it gets known in those circles and business circles, certainly in the Stock Exchange circles. It is quite often a gradual process. A man may be dilatory in handling his work. There may be lack of application and he may not attend to his job. He is then brought before the committee. This is soon known. When a man is dilatory and subsequently gets into financial difficulties and his case comes before the Stock Exchange committee it is absolutely essential that he should be given every opportunity to get legal representation so that he has every opportunity to take up his responsible place as a member of the Stock Exchange once more. But to deny him this right particularly at a time when he may have other difficulties, we suggest is not fundamentally sound and not in the best interests of justice. We hope that the hon. the Minister will reconsider that and give attention to the recommendation of the commission. We think that that paragraph in the commission’s report is fully justified and answers our demand for fundamental justice.

Then there is the new section 8 (1) (1) which provides that a stockbroker should have the right to be a director. Our colleagues on the commission disagreed with our point of view. We were in the minority. I respect their point of view but am pleased to see that the hon. the Minister has accepted that our view is the right one and that a man should not be precluded from being a director of a company by reason of the fact that he is a stockbroker. The public as a rule know whether a broker is a director of companies. An investor can easily ascertain what the position of a stockbroker is, and what directorships he holds. It is no secret because the directorships of companies must be registered with the Registrar of Companies, and a register is kept of this. It is therefore possible to get that knowledge. It is public knowledge and is available to any member of the public investing in the market. If a member does not wish to in vest in shares of a company where the broker is a director, he can go to another broker. He may feel that he should not go to a broker to get advice from that broker who is a director of the company in whose shares he wishes to invest. He has his remedy. He can go to another broker. It is quite clear that a responsible director would not give official information concerning his company which is not available to the general public. He would be dishonest if he did so. It is well known that the person holding the position of director of a company and a position on the Stock Exchange will not let his two hats conflict with each other. If he does, he will soon be in trouble either with the company on whose board he is or, alternatively, with the Stock Exchange. Therefore. we are glad that the hon. the Minister has accepted our amendment in that regard.

On the question of an independent president, dealt with tinder clause 10, I should like to say that while this is an amended recommendation of the commission, we do not feel that this in effect alters the present practice. For all practical purposes the president of the Stock Exchange virtually has a full-time job during his year of office. The clause, as now watered down, is virtually meaningless.

Clause 11 has been dealt with by the hon. the Minister and the hon. members for Paarl and Parktown. It deals with the three trust companies and a bank. All these organizations have enjoyed membership of the Stock Exchange for over 50 years. Surely, if they enjoyed this membership for over 50 years, it is only fair that this right should not be summarily taken away from them. We differed from our colleagues for the reasons mentioned by the hon. member for Parktwon. We advanced these reasons when the matter was fully discussed. These people have enjoyed these rights for 50 years and while the hon. the Minister has partly met our objections, perhaps in another seven years, when their time expires, we will have an opportunity of discussing the matter again. Possibly another Government will then be in power. [Interjections.]

Clause 19 deals with the Guarantee Fund. In this regard we say that the Guarantee Fund is, as described by the hon. the Minister, inadequate. The public is entitled to full protection. As the hon. member for Parktown said, if the brokers are so sure of their position, they should not be frightened to admit liability. When a man has to pay in cash in advance for his shares and does not get the scrip, surely he is entitled to some better protection than is offered under this Bill. We regard the proposals, as set out in this Bill, as being inadequate. We prefer the proposals as set out in the commission’s Bill. While the hon. the Minister erred on the side of looking after the members of the Stock Exchange with regard to this position, we think that he should rather on the other hand, err on the side of looking after the public. The members of the Stock Exchange are so certain of their position that as far as they are concerned, there is no risk at all. I think the public should be told beyond doubt that they can rely on the control of the Stock Exchange through the Registrar if the hon. the Minister introduces the provisions as indicated in the commission’s —report.

Clause 40 provides that the Minister may make regulations. We prefer that this word “may” be substituted by the word “shall”, because we think that the Bill should provide that the hon. the Minister shall make regulations. The Minister “shall" make regulations because it is essential that the regulations flow from this Bill. Those regulations should be clear and should have the object of controlling the situation as the Minister requires the situation to be controlled in the speech he made a moment or two ago.

This Bill arms at the tightening up of the buying of shares on credit, and introduces stricter discipline for the better operation of the market. It provides that the bear operator must be adequately controlled. We hope that this Bill will ensure that there will be a more orderly market. We know that the members of the Stock Exchange are jealous of the good name of the Johannesburg Stock Exchange and thus, the good name of South Africa in the investment world. It is essential that we should remind ourselves that the Johannesburg. Stock Market is known as one of the leading stock markets in the world. Any doubt that is cast on the control of the stock market in the outside world, does affect the good name of South Africa. South Africa needs friends in the outside world and there must be no doubt as to the control of the Stock Exchange. We hope that the hon. the Minister will en sure that there is adequate control, because it is not just the passing of the Act that is necessary, but it is also essential that he has adequate trained staff. We pay tribute to the very high standard of staff which assisted us in these discussions. All the officers in the Minister’s department were outstanding in the assistance and advice they gave us. They are able men. But do those men have the time to do all the work required having regard to their other responsibilities, officials like the Registrar of Financial Institutions, the Registrar of Insurance Companies and so forth? We do hope that the hon. the Minister will ensure that these gentlemen have the assistance of an expert and highly dedicated staff. We were impressed by their standard. We feel that if they are not overloaded, they could adequately handle the matter. We hope that the hon. the Minister will see to it that he has the staff to handle the position, because the legislation is all very well, but unless it is supported by the control which it envisages, it will become meaningless.

I want to agree with many of the statements which the hon. member for Pinetown made here. But I want to say that I am very seriously at odds with him, and I include the hon. member for Parktown, when they say that at this stage this Bill will prove of greater advantage to the brokers than to the public. I think they are wrong there. The difference between the recommendations of the commission, and the final decision taken by the hon. the Minister, is not a difference in principle and object; it is merely a difference in the degree of control that is being applied. And the provisions the hon. the Minister introduced. I believe to be provisions that are better suited to practical circumstances. I fully accept and support the amendments which the hon. the Minister introduced, because I believe that we have thereby gained a more flexible act, and that the unnecessary and too inflexible provisions have thereby been amended. But I am surprised that the hon. members opposite have associated themselves so strongly with the recommendations the commission made. Unfortunately this is typical of the United Party. All I can say is that I pity the man who sticks to his standpoint and cannot change it for a better one. And that is the very reason why the members of the Opposition continue to occupy the seats opposite. In the course of my speech I shall make further reference to the points which the hon. member for Pinetown mentioned, and reply to them.

Before I come to that I want to say that today I find myself in a very strange position. Here I find myself defending a matter and a point of view from the same side as, and in conjunction with, the Financial Mail of 5th March. I immediately want to qualify this, so that my colleagues do not gain the wrong impression. I am in no way one of their supporters, or a supporter of their newspaper, and I know exactly what they think of me as an Afrikaner. I want to refer to that disgusting article they wrote on 2nd March, 1971, about the “Afrikaner and Separate Development and the African”. I therefore also want to quote from the article from which the hon. member for Paarl quoted here. I find the article they wrote to be an extremely presumptions and derogatory article, and one can only be disappointed in one’s interpretation of it. I want to refer to what they said there—

Sir, it does not make the slightest difference what they think of me; neither does it affect me, but I think that it is an extremely unfair thing that was said about my colleagues on that commission. It seems to me as if the fellow who wrote this article is suffering from an inferiority complex, and I also want to tell him that although I disagree with hon. members of the commission sitting on the opposite side, I nevertheless have very great faith in their ability to pass that examination with ease— and that applies to all the members. Another statement that is made in this article is the following—

Sir, I do not want to say that it is true, but I should nevertheless like hon. members opposite to stand up and reply to this accusation, telling us whether they really are free agents or whether they are caught up…

Are you not ashamed of yourself?

No, Sir, I am not making the accusation; this man did so. I should like hon. members to tell the House whether they are caught up in some or other sinister, secret organization that decides what they must do. In my opinion it is right that the people should know, because these people have made an ugly accusation against all of them. If the hon. member replies to this, I shall accept his word. I just want to say this to the hon. member for Pinetown. [Interjection.] Sir, if that hon. member would keep quiet, he would also learn something, because he understands nothing about this.

He would not pass the examination either.

May I ask a question? Did the hon. member not see the apology in that same publication for the remarks directed to the three hon. gentlemen?

No, I did not.

It suited you not to read it.

I did not see it. I want to tell the hon. member for Pinetown that I disagree with his statement that we must judge this Bill against the background of the 1969 boom. I do not think that it is against that background that we must judge this measure; I think that we should rather judge it against the background of the necessity to know exactly what role the Stock Exchange plays in South Africa, how important it is and how it functions as a component in the South African economic machine. Alongside other financial institutions in South Africa, the Stock Exchange is one of the most fundamental pillars on which the South African economic structure is built. It is, therefore, one of our most important national financial institutions. The Johannesburg Stock Exchange is a money market, and a risk market; it is the only one of its kind in the country, and it is no ordinary market. It is a national investment market, a market where any citizen of the country can buy a share in any category of our economic activities. Not only does it offer an investment for the South African citizen himself, but it is also the recognized and the well-known channel which the foreigner uses to obtain a share in South Africa's economic assets. To form an idea of the role of the Exchange in our economic life, it is interesting to note that the turnover of the Exchange during the past year was about 19 per cent of the total cash budget of the State, and that this comprises about 5 per cent of our gross domestic product.

During the unhealthy boom in 1969, the market turnover was 200 per cent greater than it now is, and about 38 per cent of our cash budget. Since this Exchange is therefore an international as well as a national market, which can have a tremendous influence on our national economy, and since it is the customary and recognized channel for the foreign investor which can lead to greater development and greater primary exploitation, it is necessary for this market to engender the utmost confidence in the investor, and that the highest standards of integrity should be maintained. To achieve and maintain these ideals, there are three fundamental principles in this market that must be clearly recognizable and that must clearly be fundamental to it. In the first place, a totally free market must be maintained at all times, a market that is free of any pressure or influence from outside. The second important principle is that the investor must be certain that he has the utmost security, not only as far as the money he transfer to the broker is concerned, but also with respect to the intrinsic value of the shares or securities he purchases. The section must therefore really contain what it professes to contain. It is therefore important that the third principle, that of an honest price, should be maintained. It must be an honest price that is being negotiated according to the rules of the market and according to the free supply and demand on the market.

For these principles to take root, and for the establishment of an ordered and a respected market, it is clear that the State will have to intervene in the affairs and the administration of the Exchange. This can only take place through legislation. The State owes it to the investor and to itself to thereby bring about economic stability. The legislation now before the House is concerned with the matters I have just mentioned. The authorities, therefore, had to take certain decisions of one kind or another. In all these decisions, however, the State always tried to reconcile two points. The one is the maintenance of the security of the investor, as against the standpoint of not disrupting the free functioning of the economy and the elasticity and streamlining of the market and damping it beyond certain limits, I believe that this ideal has truly been realized in this legislation. Before the legislation was referred to the last commission—in other words the Malan Commission—there were a few basic problem areas to be solved.

Before I come round to that, I first want to associate myself with what the hon. member for Parktown said and express my thanks to the hon. member for Paarl, Mr. Malan, for the friendly, capable and circumspect manner in which he led this commission. In saying this, I think I am speaking on behalf of all our colleagues. It was a pleasure for us to have been able to serve under him.

This legislation has now come to light with answers which are we11-considered, in my opinion, and which enable the Stock Exchange itself to occupy and maintain that dignified status that we expect of it. The first problem area that must be solved, is that of the aforesaid membership of the company members, which has already been elaborated on. This membership will expire in 1978, and I believe it to be a very reasonable provision that they be granted seven years in which to put their house in order. I support this provision very strongly and although I cannot go into all the reasons for that, I just want to mention that there is one particular reason which is of the utmost importance as far as I am concerned.

When evidence was given, it was clear to me that the Exchange Committee had endeavoured throughout the years to increase and develop the quality and the standard of brokers and to establish an individual ethical code. The Exchange Committee had already progressed to the point where they had set a standard entrance examination. Over and above the very high demands, as far as character is concerned, which this imposes upon the brokers, it also imposes high financial demands, and this is being increased even further by this legislation. In other words, it is clear that the members of the Exchange were transforming themselves into a profession that could furnish the public with first-rate services and specialized advice. The code of conduct to be followed is one in which integrity is the watchword. Strict discipline is applied and this does, and will in future, I believe, increasingly enhance the prestige of the members of the Exchange, i.e. the brokers, in the eyes of the public. The rules of the Exchange Committee already provide for the promotion of the ideals I have just mentioned. This legislation endorses this, and gives those rules greater force. It is therefore obvious that this discipline can only be applied properly to natural persons and not to legal persons or to a body corporate, such as a company.

In order to apply a meaningful code of conduct, and have it function vigorously, it was clear to me that companies could not remain as members. If they could remain, there was absolutely no reason why other new companies could not also be allowed membership, Secondly, it was very clear to me that here South Africa stood at the crossroads as far as the future development of the Exchange is concerned. South Africa must choose whether it wants to go the way of the European exchanges, which are fully controlled by companies, thus throwing open its doors to company members and having to bear the consequences, for example, large organizations with tremendous capital resources taking over full control of the Exchange. Or the Exchange had to decide whether it was going to follow the Anglo-Saxon world, particularly Britain and America, where individual brokers are still the members, but where membership has already been watered down and where company members are allowed under certain circumstances. There is no certainty about where this will end; however, that is not our problem, but theirs.

This legislation, therefore, places South Africa on its own course, an individual course adopted with the full co-operation of the people that really matter, i.e. the members of the Exchange. South Africa’s road is a very clear one, and everything is on a personal, professional basis, with an individual ethical code subject to very stringent requirements. I personally believe this to be a step in the right direction, one which will be of conservative value in the long run. The world already treats the Johannesburg Stock Exchange with great esteem and respect. I believe that along these lines the prestige of our Exchange will reach even greater heights.

I just briefly want to refer to what has already been achieved. The executive committee of the International Exchange Federation accepted an invitation from the Johannesburg Stock Exchange to attend a meeting in Johannesburg early in 1972. The Exchange Federation is the advisory body for 17 of the foremost stock exchanges through the world. Its congress is being held in September of this year in Vienna. There will be 20 delegates who will have the opportunity to see the Republic, We must remember that in 1964 the Johannesburg Stock Exchange was only an associate member of this body, obtaining full membership in 1969. I believe this to be a fine achievement and I hope they will continue in this vein. I do not want to say any more about the membership of companies, but I just want to add, and my legal colleagues can argue further about this, that I do not believe that these companies had vested rights. They merely had contractual rights. The Broome Commission has already discussed the position of the President of the Exchange.

Dr. Norval published a minority report in which he recommended that the President of the Exchange be appointed from outside by the Minister, These recommendations and discussions emanated from the deficiency that existed in the fact that there was really little direct control, contact and involvement on the part of the authorities in the activities of the Exchange. This problem area was also dealt with very thoroughly by the Malan Commission. The Malan Commission then came to the fore with an altogether new approach. It was a drastic one, but I believe that it will be very effective, The necessary control will be instituted without involving the President of the Exchange, who is a very prominent figure in the eyes of the public. He himself has a very big task. Clause 35 therefore provides that the Registrar, or a person nominated by him, may attend any meeting, as the hon. the Minister said, of the committee or a sub-committee of the Exchange, and may take part in all the proceedings. This is a very big step forward, which can give the authorities the necessary contact and control on a very intimate level, as well as giving them a very good insight as far as the internal workings of this complex institution is concerned. At the same time the President of the Exchange is being given much greater status by these measures. It is provided that he shall be paid by the Exchange Committee, and that during his term of office he may not deal in shares on behalf of his clients. He is therefore being lifted out of the normal business stream and normal business activities, becoming the spokesman as well as the administrative head of this all-important market, He will be looked up to as the leader of this professional group of people, but he is also being placed in a position where the ordinary investor will look up to him as the arbitrator and guardian of his interests. Whether the brokers and the President, in future, gain the confidence and the esteem I have been speaking about here, will depend solely on their own future actions.

The other problem area into which the Malan Commission ventured which this Bill deals with and in connection with which the Minister introduced amendments, is very well covered, in my opinion, by the proposed measures now before the House—excessive credit facilities existed, a factor that contributed greatly towards the further disruption and aggravation of the perilous situation during the boom period. This problem is being combated by the provision to the effect that the period of payment and delivery of the securities shall now be laid down exactly. This means that in future, for all practical purposes, transactions will take place on a cash basis so that the share certificates which are purchased can be delivered quickly. Here I want to tell the hon. member for Pinetown that I do not think the old provision is more conducive to a cash basis than the present one. I think it will eventually come to the same thing. The old method, i.e. that of selling without ownership and buying without money, has now been eliminated with this provision. A firm grip is likewise being placed on the bear selling technique by measures according to which the individual must declare his intention and offer security. If credit is granted, brokers will, therefore, now also be compelled to provide this from their own funds. If the cash basis of a transaction is not complied with, that broker will have to report to the Exchange Committee. These are all progressive steps that will place Exchange activities on a steady and stable footing. At the same time it will discourage the speculator and benefit the actual investor. In all these measures proper cognizance has been taken of the realities of the Exchange. This is the basic difference between this side of the House and that side of the House as far as the recommendations of the commission that were not accepted by the Minister are concerned. What the Minister is doing, with the smooth running of the market, is to take realities into consideration. There are, of course, diverse other problem areas, areas in which there were shortcomings that are being eliminated here. There is, for example, security for the investor’s funds in the guarantee fund. Previously no such fund existed. But what hon. members have been complaining about, is also being retained in the legislation, i.e. by the provision that a guarantee fund must be established to the satisfaction of the Registrar. He can determine the position of the fund in accordance with the times. This is also a step forward in the direction of better stability. Another extremely important provision, is that prohibiting manipulation practices, i.e. malpractices to influence prices. In the Bill there is a provision that financial writers must now sign their articles. This can only lead to more responsible journalism. The truly responsible spokesman, the financial spokesman and writer will have no objection to signing their articles. To tell the truth, the opportunity is now being created here for financial writers to make and build up big names for themselves under this system. This Bill is actually interspersed with measures aimed at protecting and informing the public and the investor. We must remember that to an experienced person there is nothing strange in the Exchange. He knows how to valuate, examine and judge securities. Generally, however, the Stock Exchange is a closed book and something of a mystery to the ordinary citizen. He may think that he can make easy money there, but he has also found out that he can very easily lose it again when he tries to gamble. During the boom of 1969 it surprised one to see how emotionally, inexpertly and unrestrainedly people could set to work when greed gains the upper hand. I want to endorse what the hon. member for Paarl said, i.e. that it makes no difference how good an Act one introduces to protect the ordinary citizen; one cannot make any law to protect people against their own ignorance and injudiciousness. Shares are, and continue to be, a very popular field of investment in modern times. This is, inter alia, a way of protecting oneself against the vicissitudes of the spending power of one’s monetary unit. It offers one the opportunity to invest in a field which, in one’s own opinion, can grow and show a future profit. This offers one an opportunity to have a share in the business acumen of certain of the industrial leaders in the country, and it is a handy and very easy way of obtaining easily convertible liquid investment assets. That is why the authorities are trying, by means of this legislation, to create a safe and well-ordered market for the public and the investor in South Africa. When all is said and done, I believe that the Exchange will still retain its old characters. The Exchange will still retain the bull, the bear and the stag. Their actions will no longer be as unrestricted, being curtailed to a much larger extent.

Order! Before I call upon the next speaker, I want to point out that it has now come to my attention that a summons has been issued in court about the article in a certain newspaper or magazine to which reference has been made. Consequently, in terms of Standing Order No. 108, it is sub judice, and no further reference to the article or the matter may be made in this House.

Mr. Speaker, the hon. member for Pietersburg may well have said something of interest during the course of his address but, talking for myself and, I think, the members on this side of the House, it was neither listened to, nor was it of any consequence to us, because, in this debate, which has attained a high level, he has seen fit to try and introduce some from of political criticism and hence to reduce it to as low a level as possible. Therefore, I will entirely ignore what he has had to say because of my premise that I do not think it is of any consequence to us at all. We will rather leave it to his own judgment as to how he values what he has said. I would like to remind him that, as a member of a commission of inquiry appointed by His Excellency, the State President, I think my colleagues and I are well aware of our responsibilities and obligations and the duties we must discharge as hon. members of that particular commission. We do not need to have that discussed across the floor of the House by the hon. member who has sat down.

Let me say immediately that I agree with what the hon. member for Parktown said when he introduced his remarks on the Bill, namely that there is no question about it but that the object of the legislation is to bring about a balance between the brokers’ duties and activities and the public’s interest, his right to trade and protection. I think the Bill has endeavoured to ensure that a high code should be prevalent in the field of the broker and to ensure a high standard of integrity and a sense of confidence for the public. On the other hand, I feel that perhaps the most paramount aspect of this Bill in so far as the country and the public are concerned, is the latter’s protection. I maintain that that is one of the most important aspects of this entire legislation.

I want to say that, obviously, the commission—and I think that the hon. the Minister of Finance is well aware of it— was privileged to hear not only some very important addresses in the course of evidence placed before it, but also to read some very important excerpts from various writings and to get the benefit of the practice in other world exchanges of note in the financial world. It also afforded the members the opportunity of studying in detail the views of a large cross-section of the public. I do feel that it was as a result of all that and the many hours spent in deliberating, that the Bill was submitted in the report which was presented to Parliament.

I think we must not ignore what the hon. member for Pinetown said when he stated that this Bill must be viewed against the background of what took place over the last few years. We will remember that, when the principle of growth and the principle of investment in equities as a hedge against inflation, began to become the current theme of economics in this country, the public had their interest aroused and their appetite whetted considerably by the opportunities the stock market appeared to afford them. We well remember the lectures that were given that the public should not hesitate to consult with brokers. We well remember the efforts that were made to break up the numbers of large priced shares into smaller bundles or smaller quantities so that a person could buy even as little as five, ten or twenty shares at a time. Thereby the public could invest their money in this great opportunity of growth for the future. There was a tremendous amount of publicity in the Press. A great deal of advising went on until unfortunately we reached a situation which went completely out of control, not only on the part of the investor but also on the part of the Stock Exchange. I think the brokers themselves lost complete control of the situation. The public lost control of themselves. Millions of rands were lost 1o the detriment of many of our citizens.

I have a very interesting letter which I received from a doctor during the course of the commission in which he drew my attention to the numbers of people whom he had treated who had illnesses consequent upon the aggravation caused by the loss of money which represented their last savings. There are instances of people who have bonded homes in order to invest in the market. People eventually had to sell homes in order to pay for their losses. We can therefore well realize that this country, as probably all countries, needs legislation to maintain that balance at the highest level. Above all, there must be legislation to protect the public, the man in the street. I think the hon. member for Paarl quite rightly commented on that. There must be protection for the man in the street who has not the knowledge and cannot understand the involved problems of finance and the manner in which they affect the rise and fall of a market. Therefore, I must say that I, together with my colleagues on this side of the House,—and I think one might even infer that from the remarks of hon. members on the other side of the House—are disappointed that the hon. the Minister has seen fit to make some of the changes that he has made in the Bill. The very changes which the hon. the Minister made to the commission’s report were matters which we had discussed thoroughly and which had been canvassed in detail. We were completely aware of all the aspects that these changes involved. We would like to know from the hon. the Minister of Finance what motivated some of the changes that he has made. We want to know what motivated him not to rely on what the commission had done and to give us reasons which I must say I do not find entirely satisfactory.

Now, before dealing in some detail with these matters, I would just like to say that with regard to the protection which the public is to receive from this Bill, there have been some very important innovations which I am sure will stand to the credit of this House in its application in the future workings of the Stock Exchange. One of the most important is the fact that the Registrar of Financial Institutions now finds himself virtually as the watchdog of the public right within the heart of the machinery of the Stock Exchange. He not only must approve of rules and ensure that the rules provide for certain matters, but at the same time he or his representative is entitled to attend every meeting o£ a committee or sub-committee of the Exchange and also to receive notices, minutes of proceedings and all other information that any elected member of the Committee of the Stock Exchange would be entitled to receive. I think in that sense a very important protection has been provided for the public, and also a very important bridge between the broker as the professional exponent of the economics of the Stock Exchange and the public itself, which has not the knowledge and the background to be able to appreciate all that goes on.

I thought I might deal perhaps with a few of the aspects of the protection that has been afforded before dealing with some of those other matters on which this side of the House differs from the hon. the Minister, and in respect of which I would like to make one or two comments. For instance, as regard the fact that only a broker, can deal on the Stock Exchange, and certain other parties are able to sell shares without being stock-brokers, it is important to know that a broker who buys or sells from or to his client for his own personal account and through another broker must notify the client of these facts. In other words, if he were to buy shares from his client, even though he engages another broker to do so, his client, if he were still acting for that client, should be aware of it, and alternatively, of sales.

Furthermore, there is a very specific clause which says not only that there is a penalty against the stock-broker for contravening or failing to comply with the Act, but adequate steps must be taken against him. I think that is something which must give the public some form of satisfaction. Then there are the various provisions now in regard to the payments, the deposits with the Receiver of Revenue, and the excess of assets over liabilities much brokers must provide. All that has virtually been doubled now, in order to provide some additional form of financial security as regards the in-built capital of the broker in setting himself up in business on the Stock Exchange.

Another fact which I think is very important is that persons whose securities are listed on the Stock Exchange and who may make any information available to their shareholders which might influence the rise or fall of the price of the share, must immediately make that information available for immediate publication to the S.A. Press Association and at least two English and Afrikaans-language newspapers in the country. This disclosure of information which will then become available to the public, and which will be immediate, will also go a long way to restoring some confidence on the part of the public. This information must also be given to the President of the Stock Exchange.

Then, with regard to bear sales, there is the fact that bear sales have to be made known, so that it will be known that bear sales have taken place and what quantities are being sold. In fact, it is already being done, by brokers. Brokers’ notes will have to disclose to the buyer and seller involved in a bear sale that it has been the subject of a bear sale. The minimum cover in a bear sale in securities is to be 200 per cent and in cash 100 per cent of the amount owing for the securities. All these things I feel are most important and will assist. Furthermore, there is the restriction on the pledging of securities of a client to any sum beyond such moneys which the client himself may owe, so as to avoid the broker financing his business and providing the capital of his business through the shares and the securities of clients which he holds on their behalf. Then I also find in clause 32 that the auditor who is appointed has even further duties and responsibilities which rest upon him, where he has to advise the Registrar of a broker’s failure to comply with certain requirements of the Act. He must also give a report stating whether or not investigations carried out as at the date of the balance sheet, indicate that the broker or carrier appears to have complied with the provisions of section 13. Section 13 is one of the most important clauses in the Bill and deals with the provision of minimum cover and the period of payment for shares. It restricts credit, which ran riot during the last debacle we suffered. This, I think, is an important clause because it places a responsibility on a person other than the actual broker himself, and other than the Registrar himself, who may not have sufficient time to observe what is taking place. The auditor must bring any such matters to the attention of the Registrar. All these factors, I believe, are built-in sources of protection for the public and will at the same time maintain a proper balance in the market.

I would like to deal now with some matters for which we would like provision to be made in this Bill. The first is this question of legal representation, when it is sought to terminate the membership of a member. The clause does not refer to proceedings which take place with regard to the termination of a member’s membership; it says specifically that “the membership of a member who is a stock-broker is not terminated” —it is a specific, positive statement—201C;unless he has an opportunity to make representations”. We feel that he should have legal representation. Then I should like to draw the hon. the Minister’s attention to clause 15 which amends section 10 of the principal Act, and which substitutes a new subsection (2) for the existing subsection (2). This new subsection provides that in the case of a termination or in the case of other matters dealing with listings, the committee may in the event of an appeal suspend its decision pending any such appeal, but where a listing has not been included for any reason, the committee must suspend its decision immediately such an appeal has been noted and while it is pending. Not only does it provide that the committee may terminate a member's membership without his having legal representation, but even where he goes on appeal in terms of the Act, his termination of membership can become an accomplished fact and is not suspended pending the appeal. We maintain that that should be suspended as well and that there should at least be some protection for him. If both could apply, it would of course be better, and it is the intention of this side of the House to press for an amendment in this regard at the Committee Stage.

With regard to the question of corporate membership, I would like to say this, in answer to the hon. the Minister who seems to be worried about the fact that if he permits the present corporate members to remain members, it would be unfair to those corporate bodies who have been excluded from membership since 1951. He is afraid that it would result in all sorts of pressures being brought to bear upon the Minister or on the Registrar or on the Committee of the Stock Exchange. In other words, as the hon. the Minister says, it would be grossly unfair to permit these people to continue as members. But is he aware of the fact that on the New York Stock Exchange there is a prominent firm of bankers—I cannot remember the first name but I know that it is So-and-so Harriman and Company— who have been members of that stock exchange for a considerable number of years. Bankers are not permitted at this stage to be members of the New York Stock Exchange, but because this firm has been in operation for so many years and because it has an outstanding reputation, they have been permitted to retain their membership. Sir, the hon. the Minister talks about the public interest. One of the corner stones of the entire case of the Stock Exchange Committee, which gave voluminous evidence, was in regard to corporate membership, and they conceded that it was not against the public interest that these companies should retain their membership. In fact, they have done nothing at all to harm the public. They have done excellent work. They have outstanding research organizations and they have made a contribution in this field. Let me go further. The brokers, in any event, get 40 per cent of the commission and the corporate bodies only receive 60 per cent. That is a very important factor. Furthermore, with all this passage of time and the so-called apprehension with regard to the corporate members remaining members of the Exchange. it is conceded that they account for only plus-minus three per cent of the business of the Stock Exchange. One company has been in existence since 1899, one since 1919 and one since 1921. These are the three operative companies. They have raised the whole standard of investigation, research and reporting with regard to the buying and selling of securities on the Stock Exchange. Despite the tremendous turn-over, they only account for plus or minus three per cent of the business. I should like to ask the hon. the Minister what there is that worries him with regard to pressures? Why is it against public interest? The further point we should like to make is whether it is fair and just that people should be relieved of a right without any compensation, because they cannot carry on business as brokers again. Their right is terminated in seven years’ time. The hon. the Minister regards this as adequate compensation. On the expiration of that period they will go out of business as brokers. I want to put a simple question to the hon. the Minister.

Tell us who their shareholders are.

I am not concerned with that. That is the one mistake that is made by some hon. members in this House. We are not interested in personal issues. We are interested in principles. I want to give an interesting example. Let us assume that it was found in the interest of the city of Cape Town that it is necessary to build a road from Darling Street right through a section of the building of Stuttafords where, as we know, the road narrows very much. Let us say the City Council decided that it was necessary to expropriate that building in the public interest. Will they say to this company: “You can now have seven or ten years during which to trade. Carry on your legitimate trade which you have always carried on. That will be your compensation and when we have expropriated your property for which we will not pay you out, your right to carry on business will terminate.”? I challenge any hon. member on the other side to tell me otherwise than that it is a most preposterous suggestion. The very same applies here. It is not against the public interest. It has not been shown that it is against the public interest. These people are legitimate dealers and have been so for a considerable number of years. It is a right which they have; in fact, a right which very few members of the Stock Exchange enjoy, in length of membership. They have raised the level of the profession, yet the hon. the Minister is afraid that they might create pressures. That is the reason why we object. We think it is unjust. We object to this just as we objected to the majority report of the commission that no member of an exchange should be a director of a listed company. We thought that that was unfair and unreasonable. It did not add up; it was not a logical step to take. We opposed it. We are glad that the hon. the Minister has seen fit to accept our point of view. But we should really like to have the motivation for some of these other matters with which he has dealt.

I should now like to deal with the question of the president. We do not take a very serious view of the hon. the Minister’s changes although we are surprised, because the object of the commission was to try to bring about as a new step forward in this whole matter, a sense of complete objectiveness on the part of a president. He should be disassociated from the hurly-burly of everyday affairs and he should be removed completely from the problems that arise daily in a business. The purpose was to let him, as the president of a very busy organization, get the opportunity to deal with the public, on the basis of the prestige of such a position, and to deal with the affairs of brokers in the most objective possible manner. We regret that the hon. the Minister saw fit to make it a completely innocuous and, if I may say so, inane provision. It means absolutely nothing. It is exactly the same as the position is at the moment, except that it gives the committee the right to pay him a salary. The fact that he does not personally go on the floor of the exchange to buy and sell shares, is in my opinion a very hollow provision to make with regard to his duties as President of the Stock Exchange. Generally we believe that the Bill will serve a very good purpose.

Then there is one final point I would like to raise. It is the question of the liability to the public. The object here is to do something that the attorneys have done themselves, although things have changed for them for the better, in that they have trust funds which they can use in the form of investments. The interest on such investments goes to the fidelity fund of the Law Society. In any case the point is that the attorneys’ fidelity fund started the very same way. When it was found that there were not sufficient funds, the annual subscription was doubled. Then the subscription was doubled again. They carried on to the position where they had enough funds in hand to reduce the subscription and then to do away with it altogether, in the end. We believe the fact that the Bill contains the possibility of a limitation on the amount is a dangerous thing. We would like to know what has motivated the hon. the Minister to do this. Have people been worrying him about it? Has he perhaps seen evidence of which we were not aware? We would like to know these things because we have had the most extensive discussions on this matter. The object here is not to hurt people. We do not think that it can lead to anything untoward. We think that if anything is required to give confidence to the public, they should know that if anything goes wrong their interests are protected, their funds are protected and their shares are protected, I must admit, and we all know it, that they have a very fine record. I believe this is a weakness in the Bill which to many of us at one stage appeared to be so fundamental that we felt it went right to the essence of the Bill. One was almost inclined to feel that one should oppose the Bill on that principle alone, because that can disturb the public’s confidence. If I have nothing to fear, I shall give any warrant that is required. That is the principle the hon. the Minister should adopt. If there is nothing to fear, there is no warranty large enough to hold one back. There should be no fear of what is required. I believe that that is the principle which should be employed.

I want to conclude and I would like to express my very sincere thanks to the chairman and the members of his commission with whom I have worked. Then I would also like to thank the Registrar, his secretary and the other officials with whom I have worked and from whom I have learnt so much. It was my first re-entry into this House and it came via the Stock Exchange Commission of Inquiry. I must say it was a very interesting and excellent education.

Mr. Speaker, the hon. member for Jeppes raised several matters here that have already been raised by other hon. members on that side of the House. I just want to refer to a few of them and reply briefly. Firstly the hon. member referred to the new section 8 (1) (g), as inserted by clause 10 which relates to the question of whether it should be possible for a broker, if he appears before a committee, to be disciplined by the committee without his having legal representation. In that connection I just want to point out that the members of the Stock Exchange set themselves certain requirements, i.e. that all members should be of very good character. They must also be people who maintain absolute integrity in their business transactions. If anyone is allowed to become a member of their Stock Exchange, he does so by way of a secret ballot by his fellow members. I wonder if there can be any objections on our part against this clause, as it stands, if the members of the Stock Exchange themselves have no objections to the content. The only people who are going to be affected by this clause, after all are members of the Stock Exchange. If there are any transgressions, and anyone’s membership is at stake, they will appear before their own fellow members, which they themselves elected to membership of the Stock Exchange Committee. I therefore think that if there were to have been any objections to the proposed section 8 (I) (g), as it appears before this House today, those objections would have come from the members of the Stock Exchange, and the Stock Exchange Committee itself would have made representations to the effect that provision should have been made for legal representation. I also want to point out further that there is no provision prohibiting any such member from obtaining for himself all the necessary legal advice prior to the hearing, if his membership comes into question. What is more, today the members of the Stock Exchange are well trained people, people who must have a thorough knowledge of all the regulations and provisions of Acts as far as these affect their profession, and they are examined on that knowledge. I think they are all able to state their own cases properly at such a hearing. If one is to accept that the Stock Exchange Committee, which was elected by its own members, had made a mistake and done an injustice to such a member, whose membership it wishes to terminate, there is nevertheless still the special appeal board, consisting of altogether independent persons appointed by the Minister, people who are not brokers. If such a person’s membership is terminated, he nevertheless has the right, at all times, to appeal to the courts of this country. In view of all these circumstances, I really do not think that hon. members on that side of the House need to be that concerned that this provision, as it stands, would not grant members of the Stock Exchange any of the fundamental rights they ought to have.

The other matter, which the hon. member for Jeppes raised here, and which was also raised by the two other speakers on that side of the House, concerns the question of membership of the Stock Exchange by bodies corporate. There has already been a good deal of elaboration concerning this matter, and in this connection I just want to point out that probably one of the foremost requirements we ought to impose on someone who wants to be a broker, particularly with a view to the general public which invests in shares, is that investment advice should be absolutely impartial. Secondly, people who are in the brokers’ profession, should maintain absolute impartiality in their dealings with respect to transactions in which they are acting on behalf of someone else. I ask myself whether relevant companies can, in the long run, be absolutely objective as brokers, in spite of the fact that they have a long record of faithful service, and that we certainly cannot point to anything that they have done wrong. Although I do not want to make any accusations, I nevertheless want to allege that in the case of companies such as those, whose shares are distributed throughout South Africa, also being held in great numbers by other large interested groups, the possibility does exist that they can advise their clients to invest in companies in which their own shareholding companies have an interest, without straining the test of objectivity. If we just look at who the shareholders of those companies are, we see at once that they represent a tremendously broad spectrum of South Africa’s companies, I now ask myself whether I could always be objective, as an official, if I, as a broker company, owned such big companies, virtually covering the entire field in South Africa, when I give investment advice and when the interests of companies are raised, companies which in their turn have large numbers of shares in these broker companies. But I think we must go even further. Would it be right in the long run if, merely for historical reasons, we maintain a position that we should not like to develop. There, I think, hon. members opposite have contradicted themselves in a certain sense. If their view had been that companies in general could become members of the Stock Exchange, in other words that other bodies corporate could become members, I could say that they were consistent in their arguments. But the fact is that they welcome the one part of the clause, the part which provides that bodies corporate cannot be members in future, while they attack that part of the clause which provides that the four bodies corporate, which are members at present, will lose their membership on 1st July, 1978. Would this be fair to the other banks in South Africa who are not members? Would it be fair to the other trust companies in South Africa which do not have the right to become members of the Stock Exchange? Would it be fair to the insurance companies in the Republic, and to the very large group of financial companies which could probably carry out this function as well as the existing four members? Would it be fair to all of them to deny them membership in the long run? Must one, then, merely for historical reasons and because of the fact that these rights have been in force for a long time and have been exercised with integrity, as far as we know, disregard the principle of justice to everyone by not allowing memberships to be extended to other companies as well?

The hon. member for Jeppes also mentioned a further point and said that he felt that if the membership of these companies is terminated, there should be compensation for these four companies. With respect to the fact that this Parliament in all its actions, in all the laws it has made, should pay compensation, on every occasion where it has deprived persons or companies of rights, to those possibly having suffered losses, this Parliament has proved through its actions, and the laws it has made in the past, that this is not the principle on which Parliament can function. I want to refer here, in the first place, to the provisions of the Liquor Act which, I think, was introduced in the early thirties, an Act in terms of which certain bars were deprived of their rights. I also want to point to other provisions in the Liquor Act, by which hotels obtained the right to open bottle stores and many persons, I believe, suffered considerable financial loss, having paid large prices for bottle stores and then finding that hotel owners could open bottle stores right next to them or right opposite them. I think the most striking example is that of the 64 companies which a few years ago, were deprived of the right of handling third party insurance in South Africa. The fact is that these companies had had that right over a very long period of time, probably for as long a time as these four companies have acted as stockbrokers. As a matter of fact, this insurance, in which they had a large share, was in many cases an essential part of their total business. It is estimated that the present day value of third party insurance is more than R20 million per year. But I do not think that they only lost their share in that insurance business—it is also the contracts they had with the general public, as insurance companies conducting other insurance business, which meant that they were actually hit much harder than merely with respect to the loss they sustained as far as that portion of third party insurance business was concerned. It is estimated that the actual losses of these companies were as much as R100 million per year, if we also take into account these indirect losses they suffered on a short term basis. In spite of this, because it is regarded as being in the country's interest and in the interests of that specific industry, these steps were taken. Therefore, every company and every individual must be reconciled to the fact that the rights of people and companies will be encroached upon from time to time if this Parliament is of the opinion that it is in the country’s interests or in the interests of a specific industry.

The hon. member for Jeppes also raised the question of the guarantee fund which will be created. I pointed out that the liability of this fund in respect of the insolvent estate of a broker, is not an unlimited one. In this connection we must bear in mind that this is an altogether new step. It is the first time that anything like this is being created in the Republic. It is merely a further measure to stimulate the public’s confidence in their brokers. We must see it as a beginning. I think that all of us, including those of us on this side of the House, hope that it will be possible for that fund to become so strong in the course of time that its liability for the insolvent estates of brokers will be an unlimited one. I want to draw hon. member’s attention to the fact that we are dealing here with a relatively small number of brokers’ firms. There are only about 120 of them, as against the thousands of attorneys practising in South Africa and contributing to the attorneys’ guarantee fund. It would probably be unreasonable, at this stage, to expect a broker’s colleagues to be able to cover a tremendous loss as a result of his dishonesty. Brokers handle tremendous sums of money and it is possible for a broker to be liable for a large amount. It would make this profession altogether unattractive to brokers, and it could break people who are altogether innocent. It is clear that a single transaction could break quite a few firms in the process. I therefore think that the brokers’ profession should rather carry out an investigation to see whether it would not be possible for them to impose upon themselves the same obligations as in the case of attorneys. Attorneys are compelled to keep trust accounts so that their clients’ funds are totally divorced from their own funds. I think that the brokers’ profession should consider imposing such an obligation on their own members, so that their clients’ money is paid into trust accounts. Then there cannot be a confusion between their own capital and that of their clients. If they were to find such a step possible in practice, I believe that there would be much less of a chance of large-scale insolvency among brokers. I must say that to date I have not yet heard a scientific argument about why this cannot be done. If it is done it would be easier for the brokers' profession to make this guarantee fund large enough to give an unlimited guarantee with respect to the insolvent estate of a broker.

I want to come back to the Bill itself for a moment. In pursuance of what was said this afternoon by other hon. members, I want to endorse the opinion that we must not see this legislation merely against the background of the tremendous increase in share prices and the succeeding decrease in prices in 1969. We must rather regard 1969 as an episode which proved to us that amendments to this legislation have become necessary. The majority of these aspects were investigated long before 1969. The Broome Commission had by then already done its work. We can perhaps be thankful that an amendment Bill had not already been accepted at an earlier stage, because with the virtually unique experience we gained in South Africa in 1969, we are better able to realize where the actual danger points are and where steps must be taken to make such a thing impossible in the future.

The Exchange's essential role has repeatedly been emphasized here this afternoon, and I do not want to elaborate on that any further, except just to say that at this moment it is difficult for us to foresee what a tremendous role the Johannesburg Stock Exchange is going to play in the next decade or two, not only in the economic life of the Republic of South Africa, but perhaps also in the economic lives of numerous other countries in the southern part of Africa. The fact is that a great deal of the development that will take place in these various countries, will take place with capital originating from companies in South Africa, and if these companies in South Africa want to play their legitimate role in the extension and development of other States in Southern Africa, they will have to muster the capital for it, and this they will only be able to do on the Johannesburg Stock Exchange. That is why I think we must strive to make this Exchange as strong as possible and to give it so good an image that investors from overseas will eventually also channel their capital to Africa via the Johannesburg Stock Exchange. To have an Exchange which commands that degree of respect one must, I think, impose certain requirements on it.

In the first place, one must impose the requirement that it be a true reflection of the share transactions in South Africa. Against that background, then, must we also see the provision in the Bill which endeavours, as far as possible, to channel all transactions in securities through the Johannesburg Stock Exchange. In this respect I would be glad if hon. members on that side of the House would bear in mind that the companies, who made representations to the effect that they should virtually be allowed to do the work of stockbrokers, enjoy the benefits of the Johannesburg Stock Exchange, to a large extent, outside that Exchange, in that those prices are a reflection, as far as they are concerned, of the prices at which they can buy or sell shares outside the market.

But in the second place I do not think it is right that the small man in the Republic should be forced to make his purchases through brokers on the Stock Exchange, while large companies can buy and sell greater numbers of shares freely outside the Exchange. I think that the mere fact that an Exchange must be built up, requiring a great deal of investment, particularly for the establishment of a scrip bank, which is now the aim of the Johannesburg Stock Exchange, will also require a great deal of capital. I think it only right that large and small companies, and all the investors in South Africa, should do their share in providing those funds, and this they can only do by ensuring that virtually all transactions in securities are conducted by the Exchange. I also think it only fair that we, as ordinary members of the public, should at all times have a true reflection of what is happening in the investment field in South Africa, and that the large investor should not, with the special knowledge he gains from observing the Exchange and from transactions he conducts outside the Exchange, be in a more favourable position than the ordinary man in South Africa who does, in fact, make all his purchases on the Exchange. In the second place, I think that we can require of the Exchange that the listing of company securities be done on a strict and independent basis. In this respect I particularly welcome the fact that the Exchange Committee will now have the right to amend the conditions of the listing of companies that have already been listed. The mere fact that the passage of time changes circumstances, and that new practices enter the business world, makes it necessary that new general listing requirements be laid down. It is no more than right that the listing requirements of companies, which have been listed for years, can also be changed.

In the third place I think that it is absolutely necessary that it should be possible to expect from brokers operating on the exchange that they be independent in all respects, in their dealings with respect to the transactions for clients, and also in respect of the advice they must give to their clients. I therefore welcome the fact that all companies, including the four which will eventually lose their Exchange membership, will also still be able to play their role in the future with respect to investment advice, but that in the final instance one will be able to go to an independent person, an independent professional man, before one really makes that investment on the Exchange. I know that thoughts have been expressed about extending the requirements of objectivity, particularly as far as brokers are concerned, and that thought should perhaps be given to the possibility of compelling brokers to reveal their own interests in companies to their regular clients. There is now a provision in the Bill to the effect that if a broker knowingly sells shares to his own client, he must reveal that fact to the client, but there is also a general feeling in South Africa that brokers, with a view to complying as faithfully as possible with that requirement of objectivity as far as their clients are concerned, should perhaps in the course of time themselves devise a method according to which they can reveal to those clients what shares they hold in companies, so that those clients can be aware of the fact that they are dealing with absolutely objective and independent agents.

Sir, I think that the general public in South Africa is also entitled to require of the Exchange, in the big role it must fulfil, that the money which the public invests should he handled with absolute safety. That is why I welcome the various measures being adopted in this Bill. I have already mentioned here the more rapid conclusion of transactions, quicker payment, quicker delivery, the guarantee fund that must be created, the fact that the commission must exercise strict control over brokers ’ activities and also the important future role that auditors will play in that they will examine all the transactions and the books of brokers on an annual basis and be compelled to report any irregularities to the Stock Exchange Committee. I believe that with the measures being adopted in this Bill, the members of the general public will be able to take a new look at the brokers’ profession and feel more assured than ever in the past that the money they are investing on the Exchange is being handled in the safest possible way.

In conclusion I just want to associate myself with what has been said this afternoon by the hon. members who expressed their thanks to the officials of the Department of Finance who assisted this commission, and to other members who served with us on this commission. But I also want to express a particular word of thanks to all those bodies which, in some cases, with tremendous expense and preliminary preparation, brilliantly put their cases to this commission. As a result of the help they gave and the expense they were prepared to incur, we have before us today a Bill which will ensure that the Johannesburg Stock Exchange will, in future, be an institution of which South Africa can be prouder than ever before.

Sir, I noted with appreciation the words of the hon. member for Parktown and other members on that side of the House, as well as the fact that hon. members opposite accept this Bill in principle at this Second Reading, although they differ with us in certain respects and will deal with those differences in the Committee Stage.

It will not be necessary for me to reply at length or in detail to the matters that have been raised here, because we shall settle these matters later. However, I do think it is necessary for me to deal very briefly with a few of the most important aspects raised here. The hon. members for Parktown and Pinetown both referred to the various Bills we have had on this subject. They expressed the surmise or the conviction that as far as they were concerned, the Bill drafted by the commission was the best. This reminds me of the idiom that “everyone thinks his own geese swans” — everyone is proud of his own child as being the most beautiful and best of all children. As far as I am concerned, hon. members may think that with pleasure, but then I think they should also allow us, the Department and the Ministry, to think on our part that the third Bill drafted by us is the best. Why am I saying this? The hon. member for Parktown said here that the commission had spent hours and hours on drafting their Bill and that he did not think the Minister had devoted so many hours to the matter. I want to concede that the hon. members who were members of the commission did extremely good work, but I must also concede that they worked against the pressure of time. They will not deny that they had to work very hard in order to complete their work within a certain time-limit. In addition, they must concede that, after they had submitted their Bill, it took weeks and weeks before we reached this stage because I personally, the Ministry and my officials spent many hours, days and weeks studying their Bill in order to see whether we could improve it. I by no means want to belittle what the commission produced in their Bill, because they established the basis on which we as a Ministry and as a department were able to make additions by means of further study. I want to thank them for the work they did and I think they will agree with me. We believe that our Bill is a further evolution, although it is possible—and I concede this very willingly—that in a few years' time we shall be able to improve this Bill too as a result of the experience we shall have gained and the study we shall have made.

The hon. members for Parktown, Pinetown and Jeppes raised several matters which I want to deal with briefly. The hon. member for Parktown referred to the position of merchant banks in this Bill and asked what the position was in regard to other companies. He asked why the merchant banks had a privileged position and why restrictions were now being placed on other companies. The hon. member asked what the position now was in regard to insurance companies. The reply to the question is very clear: The Bill provides that insurance companies may continue buying and selling shares and that they may even make it a very important part of their activities. They may only not hold themselves out as being brokers. A broker is somebody who possesses two qualities: Firstly, that the outstanding part of his work is the buying and selling of stocks and, secondly, that he holds himself out to the public as being someone who performs this function. In future, just as in the past, insurance companies may continue doing that work, but they may not hold themselves out to the public as being brokers.

The hon. member raised another point which apparently weighs quite heavily with the Opposition and which was dealt with very well by my hon. friend the member for Vasco, i.e. that, according to them, a broker should have a legal representative when he is judged by the committee in regard to the cancellation of his membership, which is in fact very important. The hon. member for Vasco has already mentioned the argument that a broker is tried by his equals, i.e. by selected persons who, in terms of this Bill, are persons who comply with standards of integrity, education and character. Hon. members did not consider the fact that the brokers’ profession, as far as I know, differs from any other profession. It differs in the sense that the broker who is tried by his fellow brokers —he may obtain legal advice beforehand —may, after they have pronounced judgment on him, appeal to an appeal board. As far as we have been able to establish, no other profession has an appeal board. A broker may have any legal representation before the appeal board. If he is not satisfied with the decision of the appeal board, he may go to the ordinary court, with legal representation. Therefore he in fact has three opportunities. He has the opportunity of obtaining legal advice and then going to the brokers’ committee. He can go to the appeal board with his legal advisers. He can also go to the ordinary court with his legal advisers. I think, therefore, that his interests are fully protected.

The hon. members for Parktown and Pinetown and others are somewhat concerned about the position of the president in terms of the new Bill. I really cannot understand what the basis of the concern is. The proposed section 8 (1) (m) of the commission’s Bill reads as follows—

1. (m) that the president, during his term of office—
2. (ii) does not carry on business as a stock-broker.

As opposed to that, the Bill before this House provides as follows—

1. (ii) does not himself buy and sell securities on behalf of other persons.

This is a better and clearer definition. “Business as a stock-broker" may mean shareholding in a company. This is also part of the business of a stock-broker. The Bill merely puts the position more clearly, and provides that the president shall not buy or sell securities on behalf of other persons. It merely puts it more clearly. Then there is the other case. The proposed section 8 (10) of the commission’s Bill reads as follows—

1. (1) The provisions of this section shall not be construed as prohibiting a president from having a financial interest in the business of a stockbroker.

The Bill I am proposing provides precisely the same and merely defines it differently, namely with the words “from having a financial interest in such a business as a partner or a creditor”. I think it would be very unreasonable towards a president if we had this general, vague provision. After all, under normal circumstances a president is a member of a private company which is allowed by law. Therefore he must maintain his interests as a member of that company. He must be able to be an owner and a creditor. He must be able to act within the interests of his company in order to see what his other shareholders in the company are doing. This is what we are allowing him by law. But he is prohibited from buying or selling shares.

The main dispute is in connection with corporate companies, namely the membership of the large trust companies and Barclays Bank which is now proposed to be terminated in terms of this Bill. It is not pleasant to terminate the membership of companies of that nature after so many years. They are good companies; they are honourable companies and are of high integrity. But that is not what this is about. What this is about, is that for many years these companies have had a privileged position which other companies do not have and cannot obtain. It is not fair towards other companies, especially financial companies, if they cannot obtain the same rights and privileges which these three or four companies have. Hon. members said that we have resisted the pressure for so many years. In recent years, however, this pressure has become stronger and stronger. What hon. members opposite perhaps do not know is that there have been numerous financial companies, especially in the recent past, a period in which different kinds of and a larger variety of financial companies have been established, who have applied to us and tried to exert pressure in order to obtain the same rights as those four companies who were members of the Stock Exchange. This pressure has been exerted on us. This pressure would have been stronger had we not taken the present opportunity to terminate the membership of those companies. For a very long time they have been in this privileged position which has produced a large amount of money for them and created many great possibilities for them. But I now want to remove one matter in particular from the thoughts of my hon. friends opposite. It has been mentioned here repeatedly, especially by the hon. member for Jeppes, that in other countries of the world companies are allowed to be members of the Stock Exchange. We have had investigations made in order to establish whether this was the case. I want to inform this House that the information of my friends opposite is not complete.

As regards the New York Stock Exchange?

The hon. member is perhaps thinking of the bank. The First Boston Corporation. The information we have is that the companies allowed on the New York Stock Exchange are companies which are “broker dealers” in the fullest sense of the word. Our information is that neither in New York, nor in London, nor in Toronto, nor in other stock markets would these three South African companies have been allowed to become members. The type of company whose membership we are now taking away is not the type of company which would have been allowed to be members of the Stock Exchange in those other countries where companies are members. Those companies are completely different from these companies.

What about the firm Harrington, the bankers, that I mentioned?

I cannot go into individual firms, but I shall look at it. However, our information is, and I shall be able to confirm it, that the companies allowed there are completely different in character from these four companies whose membership we are now proposing to terminate Another matter about which hon. members opposite feel very strongly and about which we also feel strongly, is the protection of the interests of the investor. This entire Bill is aimed at protecting the interests of the investor. We, as a Government which is assuming a great deal of responsibility in this Bill, more than has ever been assumed in another Act in respect of the Stock Exchange, will have the task in future of safeguarding the interests of the investor, the share buyer. For that reason we are very intent on writing into this Bill the protection of the interests of the investor.

But now hon. members on that side of the House are particularly concerned about the question of the unlimited guarantee fund. They are of the opinion that one cannot protect the interests of the investor without having an unlimited guarantee fund. I have mentioned a whole series of steps which have already been taken and which will be taken by the Stock Exchange Committee in order to protect the interests of the investor. They are paying attention to various funds at present. I have already mentioned the fact that this Bill contains numerous clauses which lay down stricter provisions for stock-brokers. Almost the whole of this Bill, big as it is, is a matter of making the rules stricter. I have already mentioned the fact that the Registrar is now gaining a better grip by having a seat on the Stock Exchange Committee so that he may know what happens there. It has already been mentioned that in regard to minimum coverage, the Minister has the power to prescribe the value of shares and so forth, for example, it has already been mentioned that a stockbroker may no longer repledge the shares of his client The rules of the Stock Exchange are even stricter than those laid down in the Bill.

There are numerous measures here to ensure greater safety for the investor. In spite of this, my hon. friends opposite say there should be an unlimited guarantee fund. I think it is a fine idea, but it is unpractical. In our desire 1o promote the interests of the investor, we do have to think of the practical aspect as well. We should not aim at what is called an “overkill”. We should not carry the matter too far so that it will no longer be practicable. Would an unlimited fund be fair towards the brokers?

The attorneys have it.

The attorneys may have it, but we are concerned here with people who work with thousands and thousands of rands day after day. The brokers, who work with money all the time, have a different type of work from that of attorneys. It is dangerous to expect of any broker that he should be responsible to an unlimited extent for the sins of his fellow brokers. In that way one might even cause a certain degree of irresponsibility among certain brokers. Such a broker may get the idea that he may simply do what he likes because there is a large, unlimited fund behind him which can cover up his sins. I think we shall achieve the objects we are all striving to achieve. On page 26 of this Bill hon. members will see that the committee is being obliged to establish a fund which will provide an adequate guarantee. Not the word “may", but the word “shall" is used, and it is provided that that guarantee shall be given.

Hon. members referred to journalists. Let me make it very clear that journalists played a very large part in the last Stock Exchange crisis we experienced. They have a tremendous influence on the creation of the sentiments towards one side or the other. In regard to journalists, the writers of papers, articles and books on shares, on companies and on the Stock Exchange, we must be realistic. It will be no use if we place provisions in the Statute Book which cannot be implemented in practice, however fine they may seem. Thus even one of these provisions in the Bill has been found to be incapable of being applied in practice. For that reason we have decided to propose an amendment in that regard later.

I think we as members of this House agree in one respect, i.e. that we want to make this Stock Exchange a better one. In addition, we agree that we want to reduce the risk of the investor as much as possible. We also agree in respect of the two points that we want to give the investor the confidence that he is entrusting his money to honourable people and that all possible measures are being taken in this legislation to protect the interests of the investor and of the broker. I think we can let this suffice. The other points can be discussed in the Committee Stage.

Motion put and agreed to.

Bill read a Second Time.

Mr. Speaker, I move—

Copies of the draft Bill and the explanatory notes were made available to certain hon. members on both sides of the House even before the Bill was read a first time, to enable them to study it. The text of the Bill is very brief and consists for the most part of the usual section in regard to the coming into operation of certain provisions which occur in the Schedules to the Bill, As a result of problems which are being experienced with the administration of the trade agreement with Rhodesia, it has become necessary to amend section 51 of the principal Act.

In the Customs and Excise Amendment Acts for 1969 and 1970 a provision was included in terms of which the Minister could make certain amendments regarding sales duty introduced by notice with retrospective effect if he deemed such action justified. Since these provisions automatically lapsed with the introduction of the Appropriation Bills for 1970-’71 and 1971’72, respectively, and other commodities are being included in the sales duty this year, it was decided to include an identical provision in this year’s Bill. The Schedules, which comprise the major portion of the Bill, contain—apart from the tax proposals in respect of certain imported, dutiable and sales duty commodities—amendments to the Schedules of the principal Act which have been effected since 17th July, 1970 on the recommendation of the Board of Trade and Industries by notice in the Gazette and which are now being ratified in terms of the provisions of said Act.

Mr. Speaker, it has been arranged that this debate will not be proceeded with this afternoon. I therefore move—

Agreed to.

Mr. Chairman, I move—

Mr. Chairman, we on this side of the House are absolutely disgusted with the attitude the hon. the Deputy Minister adopts in regard to this item. We have a repetition of the same thing in the House every year and we know why the hon. the Deputy Minister objects to petitions of this kind. It is because he wants to discourage people from resigning, taking their pension money, and then coming back to work for the Administration. However, this is not one of those cases.

I have personal knowledge of the history of this case and I want to tell this Committee that this man, Captain Rademan, enrolled for training in the South African Air Force at a time when there were not many facilities for the training of pilots in South Africa. He made no bones about the fact at the time that he wished to be trained and then to become a commercial pilot afterwards. Unfortunately, as a result of the fact that a number of his seniors were transferred to the Airways, he was prevented from taking a transfer from the Department of Defence to the Department of Railways. He was handicapped by the fact that he was a member of the Permanent Force. His brother officers who were short commission officers in the South African Air Force had the privilege of transferring, but because he was a member of the Permanent Force he was prevented from obtaining a transfer. Unfortunately his only way of getting into the South African Airways as a pilot was to resign and then to reapply for a job as pilot with the South African Airways. One can understand that this man owed an obligation to the Department of Defence, because they trained him and since it costs a lot to train a pilot, but this man has paid his obligation to the Department of Defence over and over again.

When the war broke out and the South African Airways was absorbed by the Defence Department, this man became one of our outstanding squadron commanders in the field. He went right through Abyssinia through the desert into Italy, and he did outstanding work. He not only proved himself as a wonderful squadron leader, but as a wonderful leader of men. He came back at the end of the war with the decorations of D.S.O., D.F.C., not a mean achievement in those days for a very young man. Immediately after the war this man went back to the Airways and he served the Airways very faithfully until today he is the most senior pilot in S.A. Airways.

This is the sort of man we are dealing with here, not one who resigns to get his pension money and then to come back again. We are dealing with an outstanding man.

One asks oneself what gratitude and appreciation do the Railways show a man who has done such good work and who has rendered such service to the department.

I would like to point out that this man in his petition is not asking for charity. He was only away from Government service for 35 days. That was from the time he resigned from the S.A. Air Force until he assumed service with the Railways. The Administration now opposes his years in the Permanent Force being counted for pension purposes. He is not asking for charity. He is quite prepared to pay in whatever contributions are required to make up his pension. Not only is he prepared to pay the pension contributions, but interest as well; so the department will not lose anything. Sir, we take a very poor view of this attitude on the part of the Railways. This is Item No. 22. We have had cases from all other departments and not a single department has raised any objection. What is the matter with the Railways? Do they not want good service? Do they not want loyal service from their men? Then one is not surprised that they are so short of good men today, and the Railways are really short of good men. If this is the way they treat their good men, goodness knows how they treat the bad ones.

They put them in the Cabinet.

This niggardly attitude of the department towards their faithful and loyal men is not appreciated, and it is no wonder that they have lost some of their good men. I would just like to say too that I hope that the members of the Select Committee will come forward and vote with us, because we are going to vote against this recommendation of the Minister. We do not think that this man is getting a square deal and we shall certainly vote against the Minister’s recommendation.

Sir, we had the experience last year, when the report of the Select Committee on Pensions was discussed in the Committee of the whole House, that the hon. the Deputy Minister also objected to certain recommendations made by the Select Committee when they came before the Committee of the whole House. We realize that the hon. the Deputy Minister is carrying out the policy of the Government and of the Railway Administration in objecting to a recommendation which they believe is contrary to their policy of trying to discourage resignations from the Railways Administration. Sir, I think it is important that the facts in this case should be placed on record because when the Committee of the whole House considers recommendations, I would say that 95 per cent of the members are unaware of the contents of the petition. I think this is important because we are dealing here with a case on its merits. We on this side agree that persons should be discouraged from resigning from the service merely in order to obtain an immediate financial benefit. However, we also believe that it is necessary for each case to be dealt with individually on its merits. In this particular case, the Select Committee on Pensions considered the case on its merits and felt that this case should be dealt with in terms of Recommendation No. 22, which is now before the Committee of the whole House. This petitioner has been in the service of the Government since the 1st March, 1934, apart from the break in his service, to which the hon. member for North Rand referred. This break in the petitioner’s service was not prompted by a desire to achieve any immediate financial gain. I think it is necessary for the sake of the record to quote a memorandum dated the 22nd February, 1936, which was addressed to the petitioner while he was serving with the Permanent Force. The memorandum read—

After the receipt of this memorandum the petitioner resigned and applied for a post with the South African Airways, immediately a vacancy occurred and he was appointed to that post on the 12th March, 1937. Apart from his war service, he remained in the service continuously. In other words, except for a short period of just over a month, this man has been in the service of the Government since the 1st March, 1934. Surely, Sir, this is a case that should be dealt with on its merits. Where a person submits a petition to this House, the whole purpose is to have it examined and discussed by the Select Committee on Pensions, which then hears evidence, receives reports and judges the case entirely on its merits. I feel that the hon. the Deputy Minister should reconsider his decision to oppose this particular recommendation. We know that his motion to refer the recommendation to the Government, is in fact a rejection of this recommendation of the Select Committee on Pensions. Sir, I believe that this is a case where the petitioner is entitled, on the merits of the case, to the sympathy of this House and that the Select Committee’s recommendation should be accepted by this House. Most of the members in this House are not conversant with the details of this petition. That is why it is necessary for those of us who served on the Select Committee to bring the facts to the notice of hon. members so that they will realize that this man has a particularly strong case and that he deserves the opportunity to make arrear contributions which will run into a considerable amount of money. The acceptance of this recommendation will not cost the Superannuation Fund any money whatsoever. The recommendation clearly states what contributions the petitioner will have to make in order to be able to receive a slightly higher pension when he goes on pension later this year. Quite clearly, Sir, the acceptance of this recommendation will not involve the Superannuation Fund in any expenditure; it will merely be giving this man the opportunity to link up his past service so that he will be entitled to a slightly better pension, which he will be purchasing if this recommendation is accepted by the House. I strongly urge the hon. the Deputy Minister to reconsider his attitude in this particular matter.

Sir, as a member of the Select Committee on Pensions, I should like to support the objection raised by the hon. the Deputy Minister. [Interjections.] May I just inform hon. members opposite, in case they are interested, that I voted against this application when it was before the Select Committee. Perhaps they will now understand my attitude and the opinion I am going to express here. Sir, in examining the application of the gentleman Rademan, also in the light of what hon. members opposite have said, one is fairly inclined to be sympathetic towards such a person, According to the evidence which has been submitted, he has had a very good record, in the Air Force as well as in the Airways. However, it is not merit which is concerned here—I think it is more a question of principle. We know—and hon. members opposite know it as well—that no provision is made in terms of the pension legislation for a break in service such as in the case of the gentleman Rademan who resigned voluntarily. There are many groups in the Railways who should like to switch over to the Railway Police or to the South African Police. For example, I am thinking of the artisans are technicians. I personally have had to deal with many cases where a man in the service of the Airways suddenly wants to switch over to the Air Force for some reason or other. Perhaps he is not satisfied where he is, or perhaps there are more possibilities for promotion in the other direction. Surely provision cannot be made for him because it may result in nothing else but a raid by the one department on the other.

I understand that every month there are approximately 2 000 resignations from the Railways. If some of those people want to come back after a week, a month or two months, surely we are going to have to deal with the same case as this one, and an impossible situation will be created. If we grant this petition, I fear there will be several more cases, in fact, many of them, with similar applications. It is not a question of 35 days here—where must the line be drawn? May it then be 36, 100 days, several months or a few years?

But why did he leave?

At this stage I may just inform the hon. member that the gentleman is going to receive a considerable pension on retirement. It is not a question of a case where a man will be receiving a very small pension which must be supplemented in order to create a standard of living for him so that he could at least manage. He is going to receive a considerable pension, therefore it will not make much difference to him. For the very reason that a principle is concerned here, and not the merits of the case, I want to support the hon. the Deputy Minister in his objection.

Mr. Chairman, the debate which has taken place so far, and the contribution by the hon. member for Boksburg, bring us back to the position in which we were last year when we dealt with a similar case, namely a transfer or a resignation from one department and a re-admission to another. Last year when we debated that matter, the hon. the Deputy Minister said that he could not support the recommendation of the Select Committee because it would place him and the Administration in an embarrassing position. The hon. the Deputy Minister went on to say that he would nevertheless—if I could remind him what he said—see to it that the Government took cognizance of the pleas made by the Select Committee and by members on this side of the House. I want to say that he discharged that duty very effectively. The recommendation of the Pensions Committee has since been accepted departmentally. I thank him for that, but at the same time I want to point out that the reason for the refusal or the non-support by the Administration in this case is identical to the reason for the non-support in the previous case. I want to read from the report of the General Manager—

The position is that there is no legal power in the hands of the Administration to condone a break and, secondly, it is a question of policy not to support petitions. That is why this has come before the House this afternoon and why the hon. the Deputy Minister has made his particular recommendation this afternoon. What is the position? The numbers the hon. member for Boksburg referred to are not persons resigning from the Railways because they are anxious to do a similar type of work in a different Government department, but those resignations took place because the people concerned wanted to get out of the Railways or wanted to draw the benefit of whatever pension or gratuity rights they had earned up to the time of their resignation. Here we have an opportunity of looking at the record of the person concerned. First of all, at a very early age this person had a permanent commission; he was not therefore a short service officer. Because of his efficiency, his “bekwaamheid”, at that stage, he immediately came up against the problem that when he wanted to go to the South African Airways, he could not because he was a permanent commission officer and not a short-term officer. What did this person do? He left the South African Airways but did not go off into some other business removed from the Airways. He immediately served for a period with a private flying company until such time as he could join the South African Airways. To repeat what has been said, I believe that since then his service with the South African Airways has been such that he deserves and should be entitled to receive what the Committee has recommended, namely the condonation of the short break in his service for the purpose of his pension rights. I hope that the hon. the Minister will not persist in the attitude he has taken up in merely moving this deletion.

In the first place I should like to point out—I am referring particularly to the hon. member for North Rand —that in spite of the hon. member for Boksburg having explained the matter clearly, he wanted to know what it had to do with the principle of the matter. In the second instance, he did not want to recognize the principle. The hon. members regard the matter subjectively as being linked to a person. I should like to agree with the hon. member in regard to the fine record of Capt. Rademan to which they referred. It is quite a fine record of which any man may be proud. If one considers only the personal circumstances, one would be inclined to concede that the period of service of this person should be linked for pension purposes. But the hon. gentleman should realize that what is at issue here, is a policy and a matter of principle. The hon. member for Green Point has said that on a previous occasion when the Pensions Committee presented a very strong case. I had given the undertaking that it would be brought to the attention of the Government, The hon. member has tried to extend this further by saying that that was an identical case and that the Government had, in fact, decided to link the period of service.

It was a break in service.

Very well, the hon. member was referring to the case of Rouse, which is not an identical case. In that case we had the position that, in an interview the department conducted with him with a view to his employment, he was brought under the impression that his military service would be taken into account if he contributed towards the new Superannuation Fund. This is not the case here. This person had not been under any misapprehension. Furthermore, I want to point out that the hon. member mentioned the fact that Capt. Rademan has resigned from military service because he had been informed specifically by means of a memorandum that he could not be transferred from the military service to the Railways. In other words, he knew beforehand that it could not be done. In order to evade that disciplinary measure, he resigned. It is true that he wanted to join the South African Airways.

Now he has been punished.

No, he is not being punished. He contravened that disciplinary measure. He worked at another place for a little more than a month before coming to us. But hon. members have said that he did this merely in order to bridge the transitional period. But now I have to deal with this problem: If we open this door by approving this, we shall have to approve so many of these cases. In future we would then not be able to maintain this rule that officials may not simply resign from the service of one department and join another and then think that they will receive the full benefits of these pensions. Because this is the case, I move that this matter be referred back to the Government.

Mr. Chairman, the hon. the Deputy Minister misses one point, namely that it was two years after the applicant joined the South African Defence Force, that is in February 1936, that the instruction was issued that he could not transfer to the Airways. Prior to that, this instruction had not been issued. Therefore, it is incorrect to say that the applicant, at the time he joined the Defence Force, was aware that he could not transfer

Not at the time when he joined the Air Force.

When he joined there was no prohibition on transfer to the Airways. It was permissible. Therefore he joined the South African Defence Force to get. admittedly, the training which was available, but in service of his country at a time when it was permissible for him, having qualified, to transfer to the Air ways. Only subsequently, two years later, due to the exigencies of the service—I do not want to requote the instruction—transfer to the Airways was forbidden. In other words, it was not a person who joined with his eyes open knowing that he could not transfer and then deliberately resign in order to transfer. He joined with the intention of going to the Airways in due course. After he had qualified, a prohibition was placed in his way. This particular applicant, Mr. Rademan, is a person whom the hon. the Minister and I well know as an outstanding person, a person who has given 37 years of his life to the service of South Africa, a person who proved in time of testing that he was a true man who never stood back in the service of his country—even at the risk of his own life —to the extent that he earned decorations for his courage. He is a man of whom South Africa should be proud. Because of the exigencies of the service at the time, the hon. the Deputy Minister now says that they are not interested in what this man has done for his country. I want to ask why it is that so many of these cases are cases where military service and Railway service are not linked? It was at the time of war and pre-war when there were stresses and strains.

Mr. S. F. KOTZÉ: In 1934 there was no war.

No, but in 1936 the stresses and strains were building up. The Defence Force was training pilots who went over to the Airways. We must remember that the Airways was a young organization. It did not have the facilities to train its own pilots in those days. Here was a man who joined the Defence Force, who subsequently served in the Defence Force in time of war. Now, for the sake of red tape,…

It is not red tape

Of course it is red tape, as well as a lack of humanity and compassion in the Government. They are only prepared to see things within the rigid lines of their own rules and regulations. I am sorry that the hon. member for Langlaagte is not here. I would have liked him to get up and support us in this plea because he recently experienced an involuntary break in his Parliamentary service. We make provision for the condonation of such a break. The hon. the Minister, his party and this Parliament make provision for this sort of case. When this happens to us, we have plenty of sympathy for ourselves. When it happened to the hon. member for Langlaagte, we had sympathy for him. If it were to happen to the hon. the Deputy Minister, we would have sympathy for him.

No, never.

Yes. we would have sympathy even for him. I must say, however, that his break will not be a temporary one. He will very shortly have a permanent break in his Parliamentary service. Sir, here I want to emphasize that this is not a question of red tape, of rules and regulations. This is a question of the law providing that Parliament will act as the highest court of appeal in regard to applications for exception from the rule. That is what we are here for. We are not here to be used as a rubber stamp by the hon. the Minister of Transport. Why then have provision for petitions to be introduced? The point is that the hon. the Deputy Minister and the Minister of Transport regard this Parliament as a rubber stamp. If they are not prepared to grant something administratively, Parliament must slavishly say “ja en amen”, “Ngib Ngiyabonga, baas”, ” we are going to do what you say”. Our job here is to deal with an issue on its merits. In the Select Committee members were divided on this particular case because they dealt with the matter on its merits. The hon. member for Boksburg himself said that on the Select Committee he voted against this recommendation. He must have been in the minority, because the recommendation of the Committee was passed. By the hon. member’s own admission, he voted against this recommendation. The principle is clear. That is what a Select Committee is for. That is what Parliament is for. Here we are fulfilling our purpose as the highest and the only court of appeal in the case of a person who asks for some exception from the rules to be condoned. Yet the Minister stubbornly stands up and says: “I am not going to open the flood gates”. Of course he will not be opening the flood gates. Any other application of similar nature will still have to come to this Parliament. It would have to be dealt with by this Parliament on its particular merits. We are therefore not establishing a precedent in terms of which the Administration will have to approve every case. Any further cases would have to come before us, and the hon. the Minister would then be able to put forward his case against the Select Committee’s recommendation. The hon. the Deputy Minister has made out no case at all. He has not dealt with the merits of this case. He has simply said: “These are the rules and I am not prepared to depart from them”. If he had made out a case against this recommendation of the Select Committee, we would have been able to argue on facts, but at the moment we are arguing on red tape. We have only red tape in opposition to the facts which are before him. I appeal to him not to treat Parliament as a rubber stamp, but to take into account the outstanding record of service of this man and to support this recommendation by a Select Committee comprising members from both sides of this House. Then he will be acting as a democrat, and he will be treating Parliament as Parliament and not merely as a yes-man organization for the Government.

Mr. Chairman, it is not out of stubbornness or owing to a lack of sympathy that we oppose a recommendation such as this. I of course have a great deal of personal sympathy for any Railway official, such as this official, who has done many years of service, but who has a break in service and who has approached Parliament requesting that his service be linked up. Very good cases are made out for this, but this kind of debate which took place here today, was not the first debate of this nature. I recall the days when I was sitting in the Opposition. At the time I submitted the same kind of case to this Parliament. and the United Party Minister opposed it. He did this because there was a very important principle at issue. Such cases are not decided on sympathetic grounds. I experienced a case in which my own father was involved. The Minister in question then had to oppose the recommendation of the Select Committee. However, I cannot run the Railways on sentiment. I must face up to the hard facts and the facts here are that when the service of an official is broken, there is no legal power for linking up the service.

That is why they come to Parliament.

Precisely, and then the Select Committee of Parliament is often, as a result of emotional considerations, prepared to resolve that such a petition be supported. I cannot allow emotions to sway me into supporting any petition of this nature when it is not in the interests of the Railways Administration. What hon. members do not know, is that there has for many years been a mutual arrangement that no official may be transferred from one department to another unless it is with the consent of that department. When an official resigns and wants to join another department, he must first have left the service for a period of six months. When he then rejoins, his service is not linked up. This is no new arrangement, it has existed for many years.

That was not the case in 1934.

This was not the case when he joined, but when the decision was taken it was taken as a result of a serious staff shortage. It was then said that transfers may not take place. To get round that, he resigned. It happens every day. There are numerous officials who resign from the Railways because they want to join other Government departments. If his service had been allowed to be linked up in that case, it could have been an irregular case. This cannot be allowed. It is not a question of Whether he was a good man or not. He was a very good man; he was one of my best pilots. But I cannot allow such emotional considerations to play any part in regard to an important decision which has to he taken. Hon. members do not realize that the Railways have approximately 20 000 resignations every year. Plus-minus 15 000 former Railway officials return to the service again. If I were to admit this principle and create the precedent that the service may be linked up, how can I refuse the other people? Some of them left the service for a week, some for a month, and some for six months. Similar cases are being submitted, and they will also be refused.

Did they know the rules when they joined?

That does not matter. It was subsequently decided that the rules must be changed. The public servants also knew the rules at the beginning, but when a serious staff shortage arose, the situation changed. An instruction was then given to the effect that they may not transfer to another department without the consent of the department in question. It still happens today. If we were today to allow an official to circumvent the rule that he may not be transferred by simply resigning and then applying to the other department to be employed in such a way that his pension benefits are linked up, we will have chaos. Besides we are experiencing a serious staff shortage. If there were any encouragement to officials to resign, and there will be that encouragement if they know that they can return once they have resigned and that their service will be linked up, it would aggravate the staff shortage. I reiterate that this is most certainly not being done as a result of a lack of sympathy. I have a great deal of sympathy with these officials, and I know what it is like, because I was one of them myself; that is far more than those hon. members can say. The only man on that side who knows what the position is, is the hon. member for Umhlatuzana. He also knows that the staff associations are definitely opposed to linking up the service of officials who have resigned from the service. The standpoint of the staff associations is that the other members remained on in Railway service and that they endured the difficult times. They say that those people did not resign, but the other people, for some reason or other, did. Now they are asking, when such people return, why should their service be linked up so that they can receive all those benefits the others have. They object strongly to that. I am very sorry for Mr. Rademan, but as a result of a principle and a precedent which will be created with cases similar to that of Rademan, we cannot accept this recommendation.

I agree with much of what the hon. the Minister has just said here. We cannot in any department encourage people to resign, go to another department, and then return. But I cannot agree with him that a case such as this will be a precedent, and I cannot agree with the hon. the Deputy Minister that we would now be opening the doors for people to do this kind of thing. I do not know how many people are waiting to bring such cases to Parliament, but if there are such cases, they must be brought to the Select Committee. There every case is dealt with on its merits. Whether there is one or hundreds, if there are deserving cases such as this case of Rademan, it will be decided on its merits, and it is not a question of a precedent being created. The Administration will still have the right to say that they disapprove and that they do not want it, but when it is approved on its merits by the Select Committee, I do not think it behoves the Administration to oppose it.

The hon. the Minister, in trying to justify the suggestion of the hon. the Deputy Minister that this matter should be referred back to the Government, in other words rejecting this recommendation, is of course following a similar line to that which has been taken in regard to other petitions of this type. However, I think we must take into account the fact that the figures quoted by the hon. the Minister of 20 000 resignations from the Railway Administration per year, over a period of a year, of whom some 15 000 rejoin the service at a later stage, are really not relevant to this particular petition. We are dealing here with a specific set of circumstances. The hon. member for Boksburg also referred to the question of creating a precedent whereby this Parliament would be faced with many hundreds, or perhaps thousands of petitions of a similar nature. But I am quite sure that the hon. the Minister and the hon. member for Boksburg are unable to give this Committee any indication whatsoever as to how many persons would be placed in a similar position to the one we are dealing with at present. Here we are dealing with a person who endeavoured to make a career with the Government in the flying services of the Government, whose service goes back to 1934, whose main object right from the time he joined the service was to serve with the S.A. Airways, after receiving his training, and who was anxious to be one of the foundation pilots of S.A. Airways…

Order! That point has already been argued.

With respect, Sir, I am merely replying to the points which have been raised by the hon. member for Boksburg and the hon. the Minister in trying to justify why this recommendation should not be accepted.

The hon. member must abide by my ruling.

Then I should like to refer to the other matter which was raised by the hon. the Deputy Minister. That referred to a previous petition, the petition of Capt. Rouse, who was also in the S.A. Airways. The Deputy Minister said there was no similarity between these cases, in that the petitioner Rouse merely wished to link his military service. I submit that it is not entirely correct what the hon. the Deputy Minister has stated, because in this particular case the petitioner, A. Rouse, did military service in the S.A. Air Force and was then awaiting an appointment in the S.A. Airways, after serving in the S.A. Air Force. He went to the Education Department of Natal until such time as he was required by the S.A. Airways. That was the basis of his petition, namely that the break in service when he went to the Natal Education Department should be condoned in order that he might link his service with the S.A. Air Force.

Therefore this is to an extent similar to the petition which is now before us, because this man went into the employment of the African Flying Services pending an appointment in the S.A. Airways. I believe that there are not thousands of cases that are based on similar circumstances to the one this Committee is now considering. I hope that the hon. the Minister himself will give further consideration to dealing with these cases and these petitions on the basis of merit and will not merely adopt the attitude of saying: “No, it is the policy of the Government to say no as far as this is concerned”; without considering the merits of the case. Surely it was the object of the Select Committee to consider the merits, and after considering the merits it made a recommendation to give this man an opportunity to better himself as far as his pension rights are concerned.

Motion put and the Committee divided:

Ayes—74: Aucamp, P. L. S.; Bodenstein, P.; Botha, G. F.; Botha, L. J.; Botha, M. C.; Botma, M. C.; Coetsee, H. J.; Coetzee, S. F.; Cruywagen, W. A.; De Wet. C.; Diederichs, N.; Du Plessis, A. H.; Du Plessis, G. F. C.; Du Plessis, G. C.; Du Toit, J. P.; Engelbrecht, J. J.; Erasmus, A. S. D.; Gerdener, T. J. A.; Greyling, J. C.; Grobler, M S. F.; Hayward, S. A. S.; Henning, J. M.; Heunis, J. C.; Hoon, J. H.; Janson, T. N. H.; Keyter, H. C. A.; Koornhof, P. G. J.; Kotzé, S. F.; Kotzé, W. D.; Le Grange, L.; Le Roux, F. J.; Le Roux, J. P, C.; Loots, J. J.; Malan, G. F.; Malan, J. J.; Malan, W. C.; Marais, P. S.; Martins, H. E.; Meyer, P. H.; Morrison, G. de V.; Palm, P. D.; Pelser, P. C.; Pienaar, L. A.; Prinsloo, M. P.; Rall, J. J.; Rall, J. W.; Raubenheimer, A, J.; Reinecke, C. J.; Reyneke, J. P. A.; Rossouw, W. J. C.; Schlebusch, A. L.; Schlebusch, J. A.; Schoeman, B. J.; Schoeman, H.; Treurnicht, N. F.; Van Breda, A.; Van der Merwe, C. V.; Van der Merwe, P. S.; Van der Merwe, S. W.; Van der Merwe, W. L.; Van der Spuy, S. J. H.; Van Staden, J. W.; Van Tender, J. A.; Van Vuuren, P. Z. J.; Van Zyl, J. J. B.; Viljoen, M.; Viljoen, P. J. van B,; Vorster, L. P. J.; Waring, F. W.; Wentzel, J. J. G.

Tellers: G. P. C. Bezuidenhout, P. C. Roux, G. P. van den Berg and H. J. van Wyk.

Noes—35: Bands, G. J.; Basson, J. A.

L.; Baxter, D. D.; Cadman, R. M.; Cillie, H. van Z.; De Villiers, I. F. A.; Emdin, S.; Fisher, E. L.; Fourie, A.; Graaff, De V.; Hickman, T.; Hourquebie, R. G. L.; Hughes, T. G.; Jacobs, G. F.; Malan, E. G.; Mitchell D. E.; Mitchell, M. L.; Moolman, J. H.; Murray, L. G.; Oldfield, G. N.; Oliver, G. D. G.; Pyper, P. A.; Raw, W. V.; Smith, W. J. B.; Stephens, J. J. M.; Streicher, D. M.; Timoney, H.

M.; Van den Heever, S. A.; Van Eck, H. J.; Van Hoogstraten, H. A.; Wainwright, C. J. S.; Webber, W. T.; Wiley, J. W. E.

Tellers: H. J. Bronkhorst and J. O. N. Thompson.

Motion accordingly agreed to.

Recommendation No. (23), viz.—

Mr. Chairman, I move—

Mr. Chairman, this item deals with a petition by Lieut. - Col. van Niekerk, Commanding Officer of the South African Railway Police in South-West Africa. Col. van Niekerk joined the South African Police Force on 9th May, 1934. He remained in the South African Police Force until 5th July, 1940. During that time he was a contributor to the Public Service Pension Fund. He immediately applied for admission to the South African Railway Police and was accepted in that position and was in fact appointed on the 15th July, some ten days after he left the South African Police Force. He remained in the Railway Police Force where he is today and is at the present moment the Commanding Officer of the Railway Police in South-West Africa. In this instance the question arises again as to why he left the South African Police Force, what the reason was for his break in service when he joined the Railway Police Force. His position is very much the same as that of the case which we have just dealt with and similar also to the case of Detective Sergeant Moolman which we dealt with last year which has now been approved departmentally, namely that he was desirous of joining a new young service. As he put it to the Pensions Committee:

Gedurende Mei 1940 het ek aansoek gedoen deur my bevelvoerende offisier om ’n oorplasing na die Suid-Afrikaanse Spoorwegpolisie. Ek was verwittig dat dit nie gedoen kan word nie. Aangesien ek begerig was om by die Suid-Afrikaanse Spoorwegpolisie aan te sluit, veral met die oog op die feit dat dit ’n jong Mag was het as die enigste alternatief oorgebly dat ek bedank en om dan by die Spoorwegpolisie aan te sluit.

He went nowhere else. In the intervening period he took no other job and was then accepted as a member of the South African Railway Police. In the Railway Police he has had a very distinguished career and although the Minister says that we must not look at the sentimental aspects of these matters, I believe that the degree of service which he has rendered is indicative of what this man’s genuine intentions were at the time when he came into the Force. When one finds that since he joined the Railway Police he became a sergeant (first class) in May 1940, a lieutenant in October, 1946, a captain in September, 1952, a major in September, 1958, and was finally promoted to the rank of lieutenant-colonel in 1969. He also holds decorations for service in the Railway Police Force. He has now rendered a period of 37 years of service to the Police Forces of South Africa. I believe that the arguments of principle do not apply in this case. Where a man resigns not to do anything else but to…

He had purchased his discharge from the South African Police Force and now wants his service in the Police Force linked up.

This has also happened in other cases, cases which have been approved of by the Administration.

No.

There was one case which was referred to the Administration by this House last year which has since been approved of.

It is different.

The Moolman case was approved of…

It is a quite different case.

This man is in exactly the same position. He resigned from one to join the other. I want to say to the hon. the Minister that there cannot be many cases of this nature.

There are dozens of them.

There cannot be. We who serve on the Select Committee have had other applications. There is one that has been before us this session which was not recommended, because the break there was not indicative of a man wanting to carry on with similar service, be it in the South African Airways as against the South African Air Force or the South African Police as against the South African Railway Police. Where there has been an indication of a break for a change of occupation it has not been supported by the Select Committee.

The same principle applies.

Sir, with respect to the hon. the Minister—here is a man who has been in the Police Force of South Africa, serving in that particular arm of the Public Service.

Rademan was in the Defence Force.

The only difference is that he left a body under the control of the Public Service to go to one under the control of the Railways and Harbours Administration. That is what in fact has happened. If the hon. the Minister wants to be logical, he must say that if a man wants a transfer from the infantry to the Air Force, he is moved from one department to another, and he should never be allowed to continue that service.

The South African Police and the Railway Police are two different entities altogether.

But purely only as legal entities, the one being under the Railway Administration and the other under the Public Service Commission. It is the same Government. The Railway employees are Government servants.

Of course the Railways belong to the Government as a whole and is administered by the Government. That is no argument.

The hon. the Minister is quibbling now. He says because one is controlled by the Public Service Commission and the other one by the Railways and Harbours Administration, they are quite separate, that they are not both State employees.

No, I did not say that.

I want to say also that as regards the General Manager, exactly the same comment applies in regard to this petition as is the case with all of them, namely that there is no legal power so far as the department is concerned to rectify this break of service and, secondly, that it is not policy to recommend such a petition. Therefore they come to the Select Committee. I can only repeat what has been said before in regard to the other matter, namely that the Select Committee has taken cognizance of these expressions and has made a recommendation. I believe it is a recommendation which is justified in the light of the service of this officer, in the light of the evidence and the statements which are before us and in the light of his conduct in moving from one force to the other. In those circumstances the recommendation of the Select Committee should be accepted and not be referred to the Government, as was suggested by the hon. the Deputy Minister.

This is exactly a similar case to that of Rademan. The South African Police is a different Force altogether. It has nothing to do with the Railway Police. The Railway Police is a domestic force. The Railway Police as such has certain limited powers. The Railway Police do not have the same powers as the South African Police. It is different altogether. I know van Niekerk in this particular case—I know him very well. I have a very high regard for him. Whenever I go to South-West Africa, he meets me at the airport. He was given special promotion in Windhoek because he is a good officer. But it is not a question of sentiment. You see. Sir, the difference between the Select Committee and myself is that the members of the Select Committee are only human beings and are swayed by sentiment. They are very sorry…

Are you not a human being too?

This is a compliment to the Select Committee. I have to be practical and I cannot be swayed by my emotions. I have to act in the interests of the Railways Administration. I cannot allow sentiment to take over. If these hon. members were to see the hardluck stories I have had to deal with over the years, they would be amazed. Frankly, if I had to give free rein to my emotions, I do not know what would have happened to the Railways. There would have been chaos. I cannot do that; I have to be practical and not emotional.