Exploring the next three years of financial sector regulation
The next three years are going to be all about how South Africa’s financial institutions, including financial and risk advice practices, conduct their business. In its 2026 Three-Year Regulation Plan, the Financial Sector Conduct Authority (FSCA) has singled out “advancing the Conduct of Financial Institutions (COFI) Bill transition and supporting the related Parliamentary process” among its priorities.
Forward-looking, customer-focused
“The 2026 Three-Year Regulation Plan reflects the FSCA’s sustained execution on its regulatory agenda, and our commitment to building a forward-looking, customer-focused market conduct regulatory framework,” said FSCA Commissioner, Unathi Kamlana, in a media release accompanying the report launch. “The plan also demonstrates our continued readiness to support the implementation of the COFI Bill by progressively developing the market conduct framework that will underpin the future legislative and regulatory regime”.
The plan sets out a strategic roadmap for the country’s conduct regulatory framework for the period 1 April 2026 to 31 March 2029. In introducing the report, the authority referred to the pending COFI Bill as “the most significant legislative development in South Africa’s financial sector regulatory history”. It has certainly taken some time to achieve its current ‘introduced to the National Assembly’ status, having surfaced as a draft Bill back in 2018. A second draft appeared late in 2020; but affected institutions have seen little of substance since.
So, what can we learn about COFI focuses and timelines from the latest plan? A good starting point is for advisers and brokers to realise that the FSCA and Prudential Authority (PA) are already hard at work building the subordinate market conduct framework that will underpin the eventual COFI Act. Much of the early progress has been made through informal consultation with financial institutions participating in a COFI Bill Transition Working Group that met during 2025 and 2026.
Introducing COFI themed frameworks
Those who work in compliance and regulation will have seen this work filter into COFI-themed frameworks such as the draft Fit and Proper Framework; the draft Risk Management, Internal Controls and Control Function Framework; and the draft Complaints Management Framework. These themed frameworks serve as blueprints that are not yet binding standards. They set out the proposed policy approach, scope and obligations under conduct themes, and will later inform the specific instruments that give effect to the COFI Act.
Annexure A to the 3-Year Regulation Plan is somewhat of an eye-opener for anyone who thought the COFI Bill would race through the lawmaking processes following its introduction to the National Assembly in April this year. In reality, the FSCA has blocked out a full three years for the COFI Bill transition, with a disclaimer that reads, “Timelines for completion are outside of the control of the FSCA; support will continue for as long as necessary”. A handful of long-awaited advice and insurance interventions will thus remain in limbo for longer.
The FSCA specifically states that no insurance- or Financial Advisory and Intermediary Services (FAIS) Act-specific interventions are earmarked for completion over the next three years. That leaves several long-standing market conduct initiatives ‘parked’ within the broader COFI transition, including the outstanding adviser-related Retail Distribution Review (RDR) proposals, intermediary- and insurer-related premium collection reforms and insurer conduct-related amendments to the Policyholder Protection Rules (PPRs).
Potential impacts on intermediary businesses
Your writer spotted three cross-sector items in Annexure A that deserve closer attention from financial and risk advice practices. Annexure item four deals with the development of cross-sector licensing requirements in anticipation of COFI.
This is an ongoing process that will see technical work and formulation through most of 2026/27 and 2027/28. Public consultation and finalisation of same are pencilled in for the first quarter of the 2028/29 year, being April to June 2028. So, forget asking how long it will take to license under COFI, and first ask how long it will be before clarity around what licensing under COFI actually looks like.
The second issue centres around beneficial ownership (BO). The FSCA and PA have formulated a draft Joint Standard on Beneficial Owners, informed by Chapter 11A of the Financial Sector Regulation (FSR) Act. The plan links this work to South Africa’s efforts to address Financial Action Task Force (FATF) findings; but its submission to Parliament and finalisation is only pencilled in for the second half of the 2027/28 year. Resistance is futile, dear reader, and advisers and brokers should proceed on the basis that who ultimately owns, controls or benefits from licensed financial institutions must be made known.
The three-year project timeline for the joint standard on outsourcing is also up in the air, with consecutive rounds of technical work and public consultation pencilled in. This standard deals with third-party service provision rather than binder arrangements, but it remains relevant to brokers because binder functions sit in the same conversation about third-party accountability. In short, the regulator is tightening rules around who does what, who gets paid for it and who is accountable when insurer or intermediary functions are performed by third parties.
Compliance workload loading
FAnews readers concerned with the compliance workload will find solace in the authority’s consistent, transparent approach to enforcement and supervision. Case in point, the plan stays true to three overarching strategic drivers.
First, that of transitioning toward a more harmonised, outcomes- and principles-based regulatory framework. Second, aligning with international regulatory standards and addressing findings from global peer reviews. And third, responding to emerging risks consequent to the fast-paced adoption of artificial intelligence (AI) and other emerging technologies, especially among fintech firms.
There are a couple of non-COFI priority areas for the coming three-year period, including strengthening financial markets regulation; enhancing cross-sector frameworks; and continuing reforms in collective investment schemes (CIS) and retirement funds. The FSCA also has its eye on new areas under its remit, notably conduct issues around alternative investment funds and payment services. One of the interesting financial market ‘pushes’ involves benchmark reform ahead of the country’s transition from JIBAR to ZARONIA, set down for 31 December 2026. You can read more about this move in ‘Saying goodbye to the Johannesburg interbank average rate’.
Conduct supervision in a digital world
The executive summary in the latest three-year plan further identifies artificial intelligence and data risk management; open finance and data governance; and sustainable finance and ESG-related disclosures as “new and emerging focus areas” for supervision. It is clear that future conduct supervision will concentrate on how financial institutions use data, explain technology-enabled decisions, protect customer outcomes and support their sustainability claims in a digital financial product and distribution world.
On a conciliatory note, the FSCA said that it appreciated that the country’s advisers and brokers were tired of the evolving compliance burden. They wrote: “We acknowledge the cumulative impact of legislative reform on the financial sector; the 2026 Three-Year Regulation Plan therefore limits the introduction of new regulatory projects where possible, sequences reforms carefully and uses consultation and phased implementation to support industry readiness.”
Financial institutions were encouraged to participate in consultation processes to ensure that financial sector reforms were effective, proportionate and fit for the domestic context.
Writer’s thoughts:
The FSCA’s Three-Year Regulation Plan reveals a multi-year COFI transition, despite COFI being in draft since 2018. What challenges does your financial practice encounter in this slow-moving yet ever-expanding regulatory environment? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
