The FSCA published the 2023 Financial Sector Conduct Authority (FSCA) Three-Year Regulation Plan, covering 1 April 2023 to 31 March 2026. The Regulation Plan is a three-year rolling plan and is reviewed and revised on an annual basis to encompass the changing financial environment.
The most recent release provides an update on the results that have been achieved in terms of the annual review and amendment of the Regulation Plan, first published in June 2022. Our previous article on V1 of the plan is available here.
In terms of the current update, the Regulation plan sets out to what extent deliverables have been achieved, any new initiatives deemed strategically important considering emerging risks and developments, as well as providing an updated view where timelines have been adjusted and now provides a view until 31 March 2026.
From the previous version (relating directly to financial advisors and intermediaries), the following pieces have been completed in terms of the expected timelines and updated status noted below:
- Amendments to the General Code of Conduct for Authorized Financial Services Providers and their Representatives – Final amendments published on 2 December 2022. (Completed)
- Amendments FAIS Compliance Officer Qualifications Notice – Final amendments published on 2 December 2022. (Completed)
- Declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services Act – Final version published on 19 October 2022. (Completed)
- Amendment to the FAIS Ombud Rules – Draft published for public comment on 6 July 2022.
These amendments have been reconsidered, as it was subsequently identified that the Ombud Council, established in terms of section 175 of the Financial Sector Regulation Act, is better placed to progress amendments to the FAIS Ombud Rules.
In addition, a few other regulatory changes will impact selected Categories of FSPs. In terms of the Regulatory plan, it is the intention to finalise both of these Joint Standards during 2023:
- For Category II and Category IIA FSPs, the Draft Joint Standard on Information Technology Governance and Risk Management. Final draft submitted to National Treasury for tabling Parliament on 14 December 2022.
- For Category II, Category IIA and Category I FSP, as contemplated in section 3(a) of the Determination of Fit and Proper Requirements for Financial Services Providers, 2017, that provides investment fund administration services the Draft Joint Standard on Cyber Security and Cyber Resilience requirements. Second draft published for public comment on 13 December 2022.
The updated Regulator Plan notes that “a key focus for the next three years will be progressing the work to develop a new conduct regulatory framework under the Conduct of Financial Institutions Bill”.
The question of when the COFI Bill will be implemented remains unanswered, however the regulatory plan provides an update in terms of the COFI framework comprising of the three phases of the roll out.
Phase 1: Overall design of the new framework
An initial overall design of the conduct framework has been developed (finalised) and will serve as a good basis to start the development of the framework. The high-level design will, however, evolve and be refined over time as and when the transition work (Phase 3) is progressed.
Phase 2: Harmonisation/themed frameworks
The development of the harmonisation frameworks progressed well and the initial frameworks, for FSCA internal purposes, have been drafted. These frameworks are now undergoing further internal review and it is envisaged that targeted industry consultation on the draft frameworks will occur during the second half of 2023, and that draft frameworks will formally be published for public comment during the first half of 2024. A change is noted here in that the original harmonisation frameworks were developed per conduct theme but has now evolved into the framework also including “themed frameworks”.
Phase 3: Transition work
The existing financial sector laws (such as the FAIS Act) that will be repealed through the COFI Bill, and other regulatory instruments that have been delayed or impacted in overlap with the COFI Bill transition have been assessed for consideration of inclusion into themed frameworks (under Phase 2) or transition into the new framework under the COFI Bill. This also includes a consideration of how other projects, such as the proposals that came from the Retail Distribution Review (RDR) and FSCA Discussion and Position Papers, will be included in the transition.
The Regulator plans to engage the industry for consultation on the themed frameworks (Phase 2) during the second half of 2023, with transition of existing laws (Phase 3) continuing throughout 2023 and intents to have and draft frameworks published for public comment ready in the first half of 2024.
There were three new deliverables that were added to the Regulation Plan:
- Draft (interim) amendments to Board Notice 90 of 2014: A need has arisen to propose interim amendments to Board Notice 90 of 2014, pending the holistic review of Board Notice 90, that are focused on addressing certain urgent issues. The draft amendments were published for public comment in March 2023 and the FSCA is intending to submit the draft Amendments to National Treasury for submission to Parliament by the end of 2023.
- Amendments to Board Notice 257 of 2013: A need has arisen to address certain shortcomings identified in Board Notice 257 of 2013 relating to conditions in terms of which a foreign CIS may solicit investments in the Republic. Consultation on the draft amendments will take place in due course.
- Prudential Standard – Regulation 28 quarterly reporting requirements for pension funds: Due to amendments to Regulation 28 that were promulgated by the Minister in 2022, a need has arisen to amend the Regulation 28 quarterly reporting requirements to align with the new Regulation 28. This Standard will therefore prescribe quarterly reports for pension funds in respect of Regulation 28 compliance).
The Regulatory Plan also sets out detail of future changes, progress and adjusted timelines for other financial institutions and their regulation such as Financial Markets, Collective Investment Schemes, Alternative Investment Funds, Insurance, Retirement funds administrators and Retirement Funds.