On 11 December 2018, the National Treasury published the COFI Bill together with an explanatory policy paper. In a media statement, the National Treasury explained that the COFI Bill is the next phase (after the Financial Sector Regulation Act) of the legislative reforms aimed at strengthening the regulation of how the financial services industry treats its customers. The COFI Bill outlines what customers and industry players can expect of financial institutions and aims to streamline legal framework for the regulation of the conduct of financial institutions and to give legislative effect to improving market conduct and customer protection.
The Bill, which intends to replace the conduct requirements in existing financial sector laws, is designed to be:
This will require financial institutions to ensure that their actions are geared towards achieving certain principles in the financial sector and not only on technical compliance with the law. Principle-based regulation seeks to set principles that set out the intention of regulation, thereby ensuring that the ‘spirit of the law’ is not missed. This does not mean that there will be no rules, but rather an appropriate mix of principles and rules.
Outcomes-focused legislation will allow the Financial Sector Conduct Authority to test whether correct and fair customer outcomes are being delivered by financial institutions.
- Risk-based and proportionate
The new framework will enable the regulator to identify areas of greatest market conduct risk and apply their resources accordingly. Proportionality will create more level playing fields between different financial institutions, taking their size and different risks to customers into account.
- Activity–based rather than institutionally driven
There will be a shift away from laws that regulate and supervise financial institutions based on the institutional definition. Instead, the new legal framework will provide for an activity-based approach, meaning that similar activities will be regulated and supervised, irrespective of the type of institution performing the activity.
This is an important development for authorised financial services providers (FSPs) as the COFI Bill, once it comes into effect, will repeal the whole of the FAIS Act. The activities and conduct of FSPs, will be regulated under this new regulation.
As always, Masthead will identify the impact which the legislation may have on FSPs and will provide input to National Treasury. Any comments are welcomed and can be emailed to email@example.com
The closing date for submissions of public comment on the draft COFI Bill is 1 April 2019 and must be submitted directly to National Treasury at firstname.lastname@example.org. Public workshops are also expected to be held during the course of 2019.
To read more, download the documents below by clicking on the links:
- Conduct of Financial Institutions (COFI) Bill
- COFI Bill Policy Paper
- Media Statement: Invitation for public Comments on the Draft Conduct of Financial Institutions Bill 2018