Advisers brace for tighter supervision
Financial services providers (FSPs) plying their trade in South Africa’s highly regulated financial services sector can expect a streamlined, outcomes-focused regulatory framework to crystallise over the next three years.
COFI remains a priority, but…
Those advising in insurance and investment were no doubt hoping for the Financial Sector Conduct Authority (FSCA) to fast-track the Conduct of Financial Institutions Bill, which has been ‘work in progress’ for what seems like an eternity. But if you downloaded the 50-page ‘hot off the presses’ FSCA Regulatory Strategy 2025–2028 report expecting an update on when the Bill might be tabled and enacted, you will end up disappointed.
There is no mention of when this legislation will wing its way to Parliament. Instead, the regulator reminds readers that it can make progress towards its strategic objectives with or without the Bill being finalised. “While the Bill presents the clearest path to a coordinated and consistent transition, potential delays in its enactment will not prevent the FSCA from continuing its efforts to ensure the future readiness of its regulatory and supervisory framework,” they wrote. For now, they will rely on the powers under the Financial Sector Regulation (FSR) Act to bring about change through conduct and joint standards.
The latest strategy update kicks off with a triple intro: one from FSCA Commissioner Unathi Kamlana, an executive summary, and a general introduction; and the tone is predictably upbeat. “Our journey since 1 April 2018 has been one of persistence and progress, transforming from a limited-mandate regulator into a dynamic institution driven by fairness, resilience, and innovation,” the Commissioner wrote. He added that the conduct authority remained “committed to building a financial system that supports inclusive and sustainable economic growth.”
Five overarching strategic objectives
Early on, the FSCA reminds readers of its five overarching strategic objectives, which we include here for completeness. First, to improve industry practices to achieve fair outcomes for financial customers. Second, to act against misconduct and support confidence and integrity in the financial sector. Third, to promote the development of an innovative, inclusive, and sustainable financial sector. Fourth, to empower households and small businesses to be financially resilient. And fifth, to accelerate the transformation of the FSCA into a socially responsible, efficient, and responsive conduct regulator.
The regulator is making significant inroads under its second objective, as evidenced in a précis of its recent regulatory actions. Per FSCA Regulatory Actions Report 2023/24, they raised R943 million in administrative penalties imposed on 31 entities. Notable cases over that period include R475 million imposed on Markus Jooste and R216 million on Coenraad Botha for market abuse. The FSCA also took strong action against non-compliant FSPs, suspending 1061 FSP licences in 2023/24, an increase from 984 in 2022/23. There were 75 licence withdrawals (from 420 in the prior year), and 156 debarments, down from 210.
This is all good and well, but what are the key strategic messages relevant to brokers and financial advisers? According to the Commissioner, preparing for the implementation of the COFI Bill will be a major focus over 2025–2028. “This involves developing a regulatory framework that is robust yet streamlined, refining our licensing and supervisory approaches to remain adaptive to industry changes and aligning them with the principles of the COFI Bill,” Kamlana wrote.
The COFI Bill is merely a mechanism
One of the Bill’s major objectives is to ensure the regulator has the capacity to regulate new activities that fall under its jurisdiction. Worth noting is that the implementation of the COFI Bill is not a strategic priority in and of itself. Instead, COFI pops up as a mechanism that will assist the regulator in aligning with its overarching strategy.
For example, under its first strategic priority, the COFI Bill “introduces a streamlined and outcomes-based approach to conduct regulation.” The FSCA noted that the transition to the COFI Bill would harmonise and consolidate laws governing cross-cutting themes while transforming the legislative framework into one that is more outcomes-focused and principles-based. Or, in simple English, the Bill is designed to embed good conduct and Treating Customers Fairly (TCF) principles consistently across the sector.
The FSCA is also keen to use the COFI Bill to underpin its regulatory role in driving transformation and inclusion as part of its broader strategic objective to promote an innovative, inclusive, and sustainable financial sector. The Bill will provide the legal basis for greater engagement on financial sector transformation and will formalise the FSCA’s role in tracking and influencing progress under the Financial Sector Code, including through licensing activities.
A strong and credible deterrence
“The FSCA’s effectiveness as a regulator depends largely on our ability to take meaningful action against those who breach regulations and engage in misconduct,” the FSCA wrote. “Our approach to enforcement is designed to act as a strong and credible deterrence against conduct that is harmful to financial customers and that is fair, appropriate, consistent, and dissuasive.” COFI will help with the second strategic objective by streamlining enforcement and providing a consolidated legal framework to deliver more consistent and predictable supervisory actions.
The Bill will also enhance the FSCA’s ability to take enforcement action by aligning licensing and supervisory powers under one framework. By bringing more financial activities under the conduct authority’s regulatory oversight, COFI will help to ensure greater protection and fairness for vulnerable and underserved consumers, helping to deliver on the fourth strategic objective. The FSCA now lists a staggering 20 financial institution types under its purview. Your challenge, should you accept it, is to list them without using Google or your preferred AI companion.
And finally, under its ‘accelerate the transformation of the FSCA into a socially responsible, efficient, and responsive conduct regulator’ objective, the Bill enables the FSCA to modernise its supervisory tools and processes. According to the FSCA, the Bill will support a shift to an integrated, end-to-end suptech model, allowing for better data-driven decision-making and sector-wide oversight. One example is the transition to the Integrated Regulatory Solution (IRS) for risk-based supervision.
Some catchy portmanteaus
You can be excused if you find the word suptech to be a trifle contrived. In context, it is a portmanteau of supervisory and technology, used to refer to the advanced technologies that help regulators monitor, analyse, and enforce compliance more efficiently. The FSCA often refers to regtech too, a combination of regulatory and technology that refers to solutions developed by and for financial institutions to meet regulatory and compliance requirements more efficiently, using technology.
The FSCA’s 2025–2028 strategy sets out clear expectations for advisers, brokers, and financial institutions alike. While the Conduct of Financial Institutions (COFI) Bill remains in legislative limbo, the regulator has committed to pressing ahead with modernising its supervisory approach, refining licensing, and strengthening conduct standards under existing powers. The strategy signals that intermediaries must prepare for a sharper regulatory focus on compliance, governance, and fair customer outcomes.
Advisers and brokers can also expect closer alignment of supervision and enforcement as the FSCA enhances its oversight capabilities with new technologies like the IRS. Overall, the report underlines the FSCA’s intention to remain a firm but engaged partner in shaping a sustainable financial sector.
Writer’s thoughts:
The FSCA has set out clear regulatory objectives for the next three years, with or without COFI. Do you agree with the regulator’s direction? And are you confident in your compliance posture? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
