Is your advice practice ready for its first sip of COFI?
It is difficult to imagine anything winding through the mechanisms of South African law slower than the prosecution of a Zondo Commission transgressor, but your writer reckons he has found an example.
Seven years and counting
Those of you working in the financial services sector should be able to confirm that the long-awaited Conduct of Financial Institutions (COFI) Bill is a bit of a slow poke. This piece of law emerged from the Retail Distribution Review (RDR) process way back in 2014. Its first draft appeared in 2018, and it has only just (reportedly) cleared the State Law Advisers’ desk. No surprise then, that COFI cracked more than a few mentions at the in-person SAUMA Conference 2025, held in Johannesburg recently.
Despite the delay in its enactment, Kent Davis, a Partner and financial sector regulatory specialist at Webber Wentzel, was confident enough to include the still-imminent conduct legislation in his ‘things to watch for over the coming year’ presentation. “COFI is a fundamental market sectoral theme for the entire financial sector; it is going to repeal all of the market conduct regulation you have in place at the moment,” he said, resharing the familiar backdrop. He gave an update on the latest COFI timelines as well as informing the audience what to expect when the Bill is finally enacted.
No need for a third draft
The first draft of the COFI Bill was followed by a more detailed draft in September 2020. “We have not seen an official third draft and it is unlikely that we will,” Davis said. He said the next version that the industry will see will be the version that goes to Parliament. The Bill has just cleared the State Law Advisers’ review, from where it will go to Cabinet, and subject to Cabinet’s approval, embark on the full parliamentary approval process, including a final round of public consultation.
To summarise, the Bill must now be introduced in Cabinet; then tabled with Parliament; then published for public comment; and only after the appropriate times can it be assented into law by the President of South Africa. Lezanne Botha, who later took to the podium to share the Financial Sector Conduct Authority (FSCA) view, noted that “in all likelihood” the Bill would be introduced to Cabinet before the end of 2025. It is, however, unlikely that Parliament will publish it for comment before early 2026. Botha reminded the audience that National Treasury and the Minister of Finance were the ultimate ‘owners’ of the COFI Bill, not the FSCA.
Outcomes- and principles-based
COFI’s arrival will embed treating customers fairly (TCF) principles throughout the broad financial services sector. Botha said that the new framework was an outcomes- and principles-based framework, and that it will help to move the financial services sector from one that obsesses over checkboxes and form-filling to one that delivers needs-appropriate financial outcomes for consumers.
This understanding was reiterated throughout the SAUMA event. “You need to start changing the way you do business, to the extent you have not done so already, because COFI is coming. It is a certainty; there is no unpredictability about it,” Davis said.
What does COFI set out to do? First, COFI will repeal primary legislation like the Financial Advisory and Intermediary Services (FAIS) Act; the conduct parts of the Long- and Short-term Insurance Acts; the Collective Investment Schemes Control Act; and the Pension Funds Act. “Existing regulations will not be repealed on the day that COFI is enacted; there will be a managed process,” Botha said.
These primary laws, alongside relevant subordinate legislation such as the FAIS General Code of Conduct and Policyholder Protection Rules, will be replaced by a single conduct framework and unique conduct standards for banks, insurers, intermediaries, and underwriting management agencies (UMAs) etc. According to Botha, the old conduct-related primary and subordinate regulations will be captured in the conduct standards as well as other regulatory instruments.
From institution- to activity-based
Second, COFI will require each and every financial services provider (FSP) to apply for an activity-based licence. “COFI is going to be activity-based,” explained Botha. “We used to be institution-based, so you were licensed as an FSP, a collective investment scheme, or an insurer … in the future we will focus on what you do, and the specific activities you perform.” Put differently, the authority believes enforcement and supervision are more effective when tied to what a firm does rather than its institutional form.
Over time, the FSCA expects the COFI framework to harmonise and simplify the regulatory landscape. “We see this as an opportunity to bring in the proportional application of conduct legislation; to move away from the fragmented, siloed approach and bring it across all the different sectors,” Botha said. “This is an opportunity to remove the existing legislative complexity due to fragmentation and to bring in a single, coherent conduct framework that will make it easier to comply, not harder.”
The FSCA reiterated that licensing would be done under the Financial Sector Regulation (FSR) Act, and that a new licensing framework would be introduced. “All existing licences will be deemed to continue when the COFI Act comes into effect, and there will be a structured approach to replacing them,” Botha said.
Read the Bill, and monitor its progress
Your response to the evolving regulatory environment needs to start before the Bill is enacted. Davis suggested the audience get a copy of the Bill the moment it goes to Parliament. His advice was that you read it, understand how it will impact your business, and pay close attention to the list of activities to identify potential hiccups. “The last opportunity you will have to comment on the COFI Bill is through the parliamentary process,” he said. You should also keep a close watch as the Bill progresses through Parliament.
Aside from additional governance requirements, your major practical consideration following the Bill’s enactment will revolve around licensing. Although timelines remain fuzzy, both Botha and Davis were emphatic that the COFI licensing process would take years to complete. “Licensing will take time because you need to understand the activities that each specific business undertakes,” Davis said.
The COFI Bill represents a once-in-a-generation redesign of South Africa’s financial regulatory framework. Today, almost seven years since the first draft was published, there are signs that the regulatory wheels are turning. For industry participants, the focus now shifts to understanding how the new legislation will impact their businesses.
A slow, staggered implementation
You will have to pay close attention to the final wording of the Bill, and really get to grips with the activities that your firm will need to be licensed for. Davis cautioned that implementation would not be immediate or simple. “It took three years to relicense 200 insurers; it is going to be a long process,” he said. His message to the audience was to start preparing now by mapping your business activities ahead of time.
Botha also focused on the broader transformation underway across South Africa’s financial sector regulation. “There will be no more conduct-focused instruments under sectoral laws; you will have an all-encompassing conduct framework that will consist of conduct and joint standards, guidance notices, and interpretation rulings,” she concluded.
Writer’s thoughts:
As COFI gathers momentum, the experts are urging financial and risk advice professionals to begin thinking about mapping their business activities. How are you preparing, especially with so little formal guidance available? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
