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Decoding COFI: Giving teeth to TCF

Posted on 16 Feb 2024

In the first article of our COFI series, we explore how the upcoming legislation aims to bolster Treating Customers Fairly (TCF) within the financial services sector.

Although still in its second draft, the COFI Bill is unlikely to change its approach to TCF, and this allows financial service providers (FSPs) to prepare proactively for COFI implementation.

Presently, various regulations cover TCF principles to different degrees, with some, like the Policyholder Protection Rules (PPRs) for insurers, incorporating more comprehensive requirements than others. This variance results in gaps and differing interpretations of these principles across various role-players.

COFI seeks to address this. While there has been some improvement in customer outcomes in recent years, consistency has been lacking. COFI will rectify this by making TCF principles a universally understood set of requirements to deliver fair outcomes that are consistently implemented and enforceable on all financial institutions.

Giving teeth to TCF

How will COFI strengthen TCF compared to current legislation? Let’s break it down:

It’s in the detail: COFI provides a more comprehensive breakdown of the TCF Outcomes. While not explicitly listed from one to six, specific sections in COFI delve into the outcomes in more detail.

For instance, TCF Outcome 1 requires customers to feel confident that they are dealing with an institution that puts TCF at the core of its culture. This is addressed directly in Section 17 of COFI, which deals with principles relating to culture and governance. It states that financial institutions should promote a corporate culture and conduct their business in a manner that promotes the fair treatment of customers.

Another example is Chapter 6: Advertising and Disclosure; it tackles Outcome 2, emphasising the need for selling and marketing financial products based on customer needs.

Unified legislation: The current scattered nature of the TCF Outcomes across different pieces of legislation for various financial institutions can leave both financial institutions and their customers scratching their heads. For example, an insurer is categorised as a product provider but is also licensed as an FSP. Under the current regulatory framework, this means they must comply with comprehensive TCF requirements outlined in the PPRs, governed by the Long-Term and Short-Term Insurance Acts, and the less detailed and scattered requirements in terms of the FAIS Act regulations. The result allows for differing applications and potentially wanting- outcomes. COFI’s purpose is to eliminate this confusion by establishing a singular application and interpretation of TCF across all financial institutions, based on the services they offer rather than their institutional classification, for example as product providers, FSPs or banks.

Evidencing outcomes with data: The Omni-Conduct of Business Returns (CBR) is where COFI really flexes its TCF muscles. Under the new legislative framework, financial institutions can’t simply say they’re treating their clients fairly because they’re ticking off all compliance obligations set out in legislation. They will still have to follow the rules, but under COFI, there will be a much bigger focus on evidencing TCF through customer outcomes.

Financial institutions will be required to report on various conduct indicators – for instance, the business composition, i.e. the number of transactions, type of transactions and client base; reporting on complaints handling and claims management; policy cancellations; etc. – in their Omni-CBR reports. Currently, the draft states that these reports must be submitted to the FSCA for review every quarter, but this hasn’t been finalised yet.

Financial institutions will have to prove customer outcomes with data. For example, according to TCF Outcome 3, customers must be given clear information and kept appropriately informed before, during and after they sign on the dotted line. Say an FSP meets all its compliance obligations in terms of client communication, but a significant number of its customers complain that they weren’t informed of changes to their policies. Even though the FSP followed the rules, the data shows that there is an issue with the way it communicates, and to treat its customers fairly, it needs to address this problem. By having access to this data, both financial institutions and the regulator will have a better understanding of whether an organisation is monitoring and promoting TCF – or whether there is something wrong.

Here is another example: if your Omni-CBR report shows that you have a higher-than-normal cancellation rate for a long-term insurance product, there could likely be an issue. You’ll need to do a root cause analysis to find the crux of the problem and take remedial action. On the other hand, if your cancellation rate is within the acceptable range, it suggests that the product meets the clients’ needs and you’re treating your customers fairly.

The benefits of a more robust TCF framework under COFI

The advantages of a more robust TCF framework for consumers are evident. Requiring financial institutions to illustrate client outcomes with data encourages genuine prioritisation of TCF, and this will significantly benefit consumers.

However, financial institutions can use it to their advantage as well. Firstly, it can help them save on operating costs. COFI focuses on TCF outcomes and considers the nature of the business and while there will still be rules governing financial institutions’ actions, the shift allows institutions to demonstrate positive client outcomes rather than merely ticking off a list of compliance items, providing more flexibility.

Secondly, as previously mentioned, COFI provides a more detailed description of the principles and standards that underpin the various TCF Outcomes, consolidating these principles. Unlike current legislation, which may lead to differing interpretations, financial institutions will have a singular legislative reference for a clearer understanding of the TCF Outcomes and the criteria against which customer outcomes will be assessed. Regardless of whether one is a product provider, FSP, a credit provider, a bank or any combination of these, the uniform application of TCF principles for similar activities ensures consistency across the industry.

Thirdly, incorporating client outcome measurements is a sound business practice. It allows organisations to pinpoint areas of concern, identify root causes, and implement remedial actions early. This proactive approach results in heightened customer satisfaction, increased client retention and enhances the business’s reputation as one that prioritises the financial well-being of its customers.

Preparing for the future

While the exact date when COFI will be signed into law is not known, FSPs can already prepare for it when it comes to TCF. If you run a clean business that operates smoothly and treats clients fairly, chances are you are already well-prepared for COFI.

However, a potential challenge for many FSPs lies in their ability, firstly, to record the necessary Omni-CBR data and secondly, to use and translate this data into evidence that demonstrates the FSP’s commitment towards TCF Outcomes. To prepare for this challenge, FSPs need to review their current data-gathering systems to determine whether they can adequately report on and then measure client outcomes. This issue was a major focus for us last year during our client audits. Throughout 2023, our emphasis was on guiding our members through the TCF principles, assessing whether they have considered and identified their current conduct indicators, and, crucially, aiding them in their understanding of what may be required to test TCF compliance through outcomes-based monitoring.

Each FSP should have a system – whether a simple Excel sheet, a more complex version or an advanced customer management system – that facilitates the collection, organisation and storage of data, enabling them to seamlessly access the data needed to complete their Omni-CBR reports.

A draft of the Omni-CBR report is available, and a revised version of the draft is expected to be published by the FSCA by 1 July 2024. This allows FSPs to anticipate the data requirements and implement effective systems in the meantime.

Still, despite this, another potential issue is whether FSPs will know what they need to measure and report to evidence TCF. Each organisation must use their TCF framework to conduct an ongoing conduct risk analysis to identify specific risks in their business and understand how these can impact TCF outcomes.

Another proactive step smaller FSPs should strongly consider is obtaining customer feedback to pinpoint areas for improvement in customer outcomes. Addressing these areas before COFI takes effect ensures a smoother transition.

In addition, FSPs should prioritise staff training on market conduct indicators, the TCF Outcomes and root cause analysis. By ensuring that your team is well-versed in these aspects, you contribute to a more seamless implementation of COFI regulations and Omni-CBR reporting.

Effective planning for COFI

With its greater focus on outcomes rather than rigid rules, COFI is poised to bring further changes to the financial industry. Though this transformation may appear daunting, FSPs can organise their operations now to meet the impending requirements.

By taking proactive measures, FSPs will position themselves to be well-prepared for COFI and Omni-CBR, effectively averting disruptions to their business operations upon its enactment.

Furthermore, it is beneficial to perceive an enhanced TCF framework as a positive development for FSPs. This framework not only provides a clearer understanding of the outcomes and their measurement criteria but also promotes good business practices. This fosters client satisfaction and retention.

Embracing these changes will not only help comply with regulatory requirements but also contribute to the overall success and resilience of FSPs in the evolving financial landscape.


A national supplier of risk management services to independent financial advisors and other licensed financial service providers (FSPs). Established in 2004, we help our clients overcome their risk management challenges so they can grow and thrive in an increasingly regulated industry. Providing professional guidance and practical support, our team of specialists is passionately committed to delivering tangible solutions.

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