In the last few years, there has been a steady movement towards a financial industry that is more focused on the fair treatment of customers, and the conduct of financial institutions towards their customers. Many reformative regulations have been introduced to achieve and work towards this objective. More recently the Minister of Finance published the Conduct of Financial Institutions Bill (“COFI “) in December 2018, and on 29 September 2020 the National Treasury published the second draft of this Bill.
Overview
COFI forms part of the Twin Peaks model implemented by the government in terms of their regulatory reform process of the financial sector. COFI aims to consolidate all the legislation and conduct standards that regulate financial institutions into one piece of legislation.
More importantly it is the proposed implementation within the Bill of the Treating Customers Fairly Principles, which will subsequently make these principles legally binding and enforceable on all financial institutions.
The effect of the COFI Bill is that it will be ultimately repeal many existing financial regulatory provisions, which are as follows:
- Long-term Insurance Act, No. 52 of 1998;
- Credit Ratings Services Act, No. 24 of 2012;
- Friendly Societies Act;
- Short-term Insurance Act, No. 53 of 1998;
- Protection of Funds Act;
- Financial Advisory and Intermediary Services Act, No. 37 of 2002 (FAIS Act) [except for part I of Chapter VI providing for the Ombud for financial services providers, and definitions in section 1(1)].
This Bill intends to address unfairness in customer dealings with the hope of ensuring that businesses and customers are provided with the best products and fair services that will cater to all their financial needs.
Financial services and products, through this proposed legislation, will have to be customized and designed in ways that cater for specific customer groups and the marketing of these products will have to be targeted accordingly.
Specifically in terms of licensing, the principle of treating clients fairly and applying the conduct standards compliance with the provisions of COFI will be extremely important. As a result, financial service providers will need to make sure that their governance practices and culture are in accordance with the principles that underpin this proposed legislation.
Conclusion
Legislative reform such as that intended by COFI can be difficult to digest and implement. It is important to get legal assistance in instances where you want to align your business with new legislative changes and to be in compliance with such legislation.
Contact an Attorney at SchoemanLaw Inc for your commercial and contractual law needs.
Written by Raeesa Ebrahim Atkinson, Junior Associate, Attorney, Schoeman Law