In 2012 the National Treasury introduced the ‘twin peaks’ model for financial regulation. This is daunting for many firms and includes the implementation of two new laws to replace previous legislation.
The first of these is the Financial Sector Regulation Act 9 of 2017, which has been in incremental operation since April 2018. The second is the Conduct of Financial Institutions (COFI) Bill, of which the second draft was released for comment in 2020.
The COFI Bill sets out a wide-ranging regulatory framework for the conduct of financial institutions – including financial services contact centres.
Making the rules
The Financial Sector Conduct Authority (FSCA) has put in place a Regulation Plan, with a three-year outlook, which is reviewed and revised annually to ensure that it remains up to date and effective. It also needs to continue aligning with the FSCA’s broader strategic objectives, taking into account emerging risks and developments.
Phase one entails the overall design of the new framework, which will evolve and be refined over time once the transition work in phase three has progressed.
Phase two entails harmonisation and themed frameworks, which are now undergoing further internal review. It is envisaged that targeted industry consultation on the draft frameworks will occur during the second half of 2023, and that draft frameworks will be published for public comment during the first half of 2024.
In phase three, transition work will entail repeal of existing financial sector laws that will be replaced by the Conduct of Financial Institutions (COFI) Act, which is still at the Bill stage and out for public comment.
New rules and old
Regulatory instruments that were put on hold due to overlap with the COFI Bill transition process are being assessed to determine which requirements can be removed from the respective laws and draft laws. These identified requirements will be incorporated into the themed frameworks that are part of phase two
The requirements that remain are in the process of being assessed to determine if these requirements should be transitioned into the new framework under the COFI Bill and how this should take place.
In particular, the following draft regulatory instruments have been placed on hold:
- Conduct Standard for Cooperative Financial Institutions.
- Amendments to the Policyholder Protection Rules under the Long- and Short-term Insurance Acts.
- Amendments to the Regulations under the Long- and Short-term Insurance Acts.
- Conduct Standard relating to Governance, Fit and Proper and Other Requirements for CIS Managers.
- Conduct Standard relating to Advertising and Marketing Requirements for CIS Managers.
- Conduct Standard relating to Culture and Governance for pension funds.
What’s next?
According to the latest FCSA regulation plan, phase three work is set to continue throughout 2023, with the intention of having initial formal proposals ready in the first half of 2024. However, these proposals may be consulted on and implemented on a staggered basis over several years.
How and when this work will be consulted on and implemented will depend on priority. Details of this process and how it will be implemented will be communicated to the public to ensure clarity and transparency in the process.
The FSCA views the COFI Bill as a critical development that will shape the future conduct framework, and many of the FSCA’s current conduct regulatory framework projects are highly dependent on the promulgation of the COFI Act.
Updates from Voyc
It goes without saying that all firms must comply with the new legislation. At Voyc, we believe that meeting the requirements of the COFI Bill is crucial. It also provides an opportunity for financial services firms in SA to relook their processes to enhance their operations.
Voyc can offer extensive support for regulatory compliance, including uncovering instances of unfair customer treatment and quickly identifying vulnerable callers. Should you require help in modifying your processes to conform to the Bill and streamlining your operations, contact us and we would be delighted to discuss how Voyc can assist you.
