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New legislation outlines rules for how South African banks should be treating customers

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National Treasury has published the draft Conduct of Financial Institutions (COFI) Bill for public comment. In an attached statement, Treasury said that the COFI Bill is the next phase of the legislative reforms aimed at strengthening the regulation of how the financial services industry treats its customers.

“The Bill follows the Financial Sector Regulation Act (FSRA) which established two new authorities with dedicated mandates,” it said.

“The two new authorities are the Prudential Authority (PA) which manages prudential risk (financial health), and the Financial Sector Conduct Authority (FSCA) which manages the market conduct risk across all financial institutions. Both regulators became operational on 1 April 2018.”

Treasury said that the Bill aims to establish a consolidated, comprehensive and consistent regulatory framework for the conduct of financial institutions that will:

  • Protect financial customers;
  • Promote the fair treatment of financial customers by financial institutions;
  • Support fair and efficient financial markets;
  • Promote innovation and the development of and investment in innovative technologies, processes and practices;
  • Promote competition;
  • Promote financial inclusion; and
  • Promote transformation of the financial services sector.

Comments on the bill will be accepted until 1 April 2019.

Below BusinessTech looked at some of the most notable changes in each chapter of the COFI.


  • Chapter 2 of the COFI Bill proposes a new licensing framework for financial institutions, replacing the myriad of different registrations and authorisations in the financial sector with a single market conduct licence from the FSCA.
  • To reduce regulatory barriers to entry and better support market development and transformation, the licensing approach will allow the regulator to set licensing requirements on new entrants. It said that these will be in support of developmental, inclusion, innovation, and transformation objectives, to permit gradual compliance over time with specified regulatory requirements.
  • Chapter 3 of the COFI sets out the general principles and fit and proper, governance and operational requirements with which financial institutions must comply.
  • Chapter 3 also allows the FSCA to set requirements to support the development of appropriate corporate culture that focuses on the fair treatment of customers, improves customer confidence and enhances transparency and discipline in the industry.
  • Chapter 4 of the COFI requires financial institutions to have clear processes and procedures regarding the design of financial products marketed and sold. It aims to ensure that products take into account the identified needs of identified financial customers and are targeted accordingly.
  • Informed decision-making by financial customers relies on access to meaningful information at the right time. Chapter 6 of the COFI Bill addresses the provision of adequate, clear information by financial institutions to financial customers before, during and after the point of sale.
  • The bill states that financial institutions must ensure that their distribution models are appropriate to ensure the delivery of appropriate products and services and, where applicable, provide access to suitable advice. Customers should be able to understand and compare the costs and contractual implications associated with sales and distribution models.
  • Chapter 8 ensures that customers do not face unreasonable post sale barriers when wanting to change a financial product or service, switch provider, submit a claim or make a complaint.
  • Chapter 10 sets out the reporting obligations of financial institutions. This includes annual disclosures to the regulator, and gives the regulator the ability to request information from a financial institution.

Conduct of Financial Institutions Bill 2018 by BusinessTech on Scribd

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