There’s a new sheriff in town

As part of the changes that have been brought about by regulatory reform, as of 1 April 2018, the Financial Services Board (FSB) became the Financial Sector Conduct Authority (FSCA).

This has been done in line with the implementation of Twin Peaks. Finance Minister Nhlanhla Nene has signed the Commencement Notice for the Financial Sector Regulation Act (FSRA), formally establishing both the FSCA and its sister organization, the Prudential Authority (PA) which was formally the South African Reserve Bank. 

Key objectives

Throughout the lead up to the establishment of the FSCA, the FSB was very clear about the role and the objective that the FSCA would undertake. 

The FSCA’s key objectives will be to:

• protect financial customers by promoting their fair treatment by financial institutions;
• provide financial education programs, and promote financial literacy;
• enhance and support the efficiency and integrity of financial markets;
• assist in maintaining financial stability;and
• support the overall policy objectives of financial inclusion and transformation of the financial sector. 

A media release by the FSCA pointed out that there will not be a big bang approach to the implementation of the FSCA mandate. Rather, gradual changes over the course of the current year will occur as sections of the FSRA come into operation in a phased manner. 

The FSCA adds that, in the main, financial institutions can expect interactions with the FSCA to be business as usual in the short term industry. 

Key leadership

The FSCA reports that in terms of the FSR Act, a Commissioner, and Deputy Commissioners, will make up the Executive Committee that will lead the FSCA. 

Nene has published regulations setting out the appointment process for the Commissioner and Deputy Commissioners, and the FSCA reports that it expects that process to start soon. 

As an interim measure, the Minister has determined that a Transitional Management Committee will manage the FSCA until the Commissioner is appointed. The Committee will comprise the members of the former FSB Executive Committee, the Chairperson of the former FSB Board, Abel Sithole, and a National Treasury appointee, Katherine Gibson. 

The FSCA adds that the Committee will perform all the functions of the FSCA Executive as described in the FSRA, while Sithole will be caretaking as the FSCA Commissioner, until the new Commissioner is appointed. The Committee has commenced its work and its members will stay on in an advisory capacity for a period of three months after the Commissioner has been appointed. This process will ensure a seamless transition to the FSCA. 

Minor changes

The FSCA reports that during the course of the coming twelve months, there will be gradual changes within the organisation.

One such change would be a new functional organisational design that is better aligned to its new mandate than the current sectorial structure. The FSCA will also undertake to up-skill its current staff and undertake the recruitment of new skills and expertise to address the expanded mandate. 

Other developments to look out for include the publication of the FSCA’s first regulatory strategy, highlighting its strategic focus areas over the next three years. Focus areas would be financial inclusion, Fintech, and a more proactive and judgment-based supervisory approach. 

The regulatory strategy must be published by no later than end September 2018. 

Another key development would be the publication of various memoranda of understanding between the FSCA, the Prudential Authority and the National Credit Regulator which would provide detail of how the FSCA will co-ordinate its responsibilities in the Twin Peaks framework. 

Editor’s Thoughts:
The transformation into the FSCA has come after many years of building trust with the industry. The FSCA has always promised to be more industry facing and very interactive. Let’s see if this change makes a difference. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].

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