The COFI wait-and-see may be nearing its end
At a recent asset manager event, the best a legal adviser could offer on when the long-awaited Conduct of Financial Institutions (COFI) Bill might be promulgated was a tongue-in-cheek “COFI is perpetually around the corner”. In search of a more definitive answer, your writer attended the Financial Sector Conduct Authority (FSCA) Conference held in Johannesburg on 18-19 March 2026.
A quest for COFI clarity
This knowledge quest started with the keynote address delivered by FSCA Commissioner Unathi Kamlana early on Day 1 and continued with a more promising engagement in the form of a brief update on the COFI framework by FSCA Divisional Executive for Regulatory Policy, Eugene du Toit.
The Commissioner offered a big picture view of the evolving regulatory environment. “Regulation, like the financial system itself, cannot remain static,” he said. “It must evolve as new risks, technologies and market structures emerge.” Kamlana reminded the audience that effective regulation goes beyond “prescribing detailed rules for every situation” to creating a principles-based framework that delivers the right outcomes for consumers.
The Authority’s principles- and outcomes-based approach is indicated because business models tend to evolve faster than regulatory frameworks can be rewritten. “Rather than attempting to prescribe every operational detail, our role is to establish clear principles around fair customer outcomes, governance, market integrity and transparency,” he said. The matching of regulation to the risk it seeks to address emerged as core to the COFI philosophy.
“A framework that is too rigid can stifle innovation and competition while one that is too light can undermine trust and stability,” Kamlana said, adding that both the FSCA and the Prudential Authority (PA) were tasked with enabling innovation within appropriate safeguards. He pointed out that COFI was a mindset shift from a narrow focus on compliance towards greater accountability for outcomes.
Serving financial consumers, better
“Institutions must consider not only whether they have complied with the rules, but whether the products they design, the advice they provide and the services they deliver, genuinely serve the interests of financial customers,” the Commissioner said. His contention was that the philosophical shift should already be influencing firms’ conduct, and one might argue that makes the actual, eventual implementation date of COFI moot.
“The real question for the industry is not when COFI will arrive, but how prepared institutions are for the regulatory model that COFI represents,” Kamlana said. His was an interesting comment given how long the regulation has been on the horizon. Your writer felt some compassion for an audience of decision-makers who have been diligently following this outcomes-based philosophy totally ‘in the dark’ about the exact terms and conditions that will eventually fill the COFI Act’s 170-odd pages.
Du Toit was almost apologetic when he took to the podium, saying he was not going to share details, technical content or timelines around the COFI Bill. “My presentation will be more of a philosophical discussion about the Bill and how we navigate and embrace change in light of it,” he said. He did offer a basic update alongside the disclaimer that it was National Treasury and the Minister of Finance (and not the FSCA) that controlled the process. “The Bill will probably see Parliament this year,” he said. “And then all of us will see what is in COFI.”
The audience was told to expect a multi-year transition after the COFI Act receives presidential assent, with different provisions likely to come into effect at different times. At best, the processing and issuing of new activity-based licences could take two to three years. Full implementation may therefore only be reached in 2029 or 2030.
Promulgation still a ways off
The last phrase is a telling reminder that industry has not had sight of any publicly circulated changes or amendments since National Treasury published the second draft of the COFI Bill for comment in September 2020, following an earlier draft in December 2018. FAnews readers will also know that, once a Bill is formally introduced in Parliament, it enters a legislative process that includes committee scrutiny, possible public hearings, debate and amendment, and consideration by both Houses before it can be sent to the President for assent.
Under the conference’s ‘navigating and embracing change’ theme, Du Toit reflected on a decades-long journey that has moved South Africa from “a fragmented and siloed approach to supervision and regulation” to an integrated, outcomes-driven system. “Conduct regulation has steadily expanded, becoming more cross-sectoral and principles-based, and more aligned to international norms,” he said. In this context, the COFI Bill was described as the next logical evolution in a long-running effort to protect customers and build a competitive, modern financial sector.
Conduct oversight was singled out as foundational for public trust in the financial services sector. It was also described as non-negotiable in a world where the core functions of advisers and product suppliers were being enhanced by artificial intelligence (AI) and digitalisation, introducing new risks. Du Toit advocated a harmonised, outcomes-based and technology-neutral approach to regulation as a foil against these evolving risks, calling COFI an opportunity to reset South Africa’s conduct architecture.
A modern conduct architecture
“COFI creates a single, modern conduct architecture aligned to emerging risks, embedding fair outcomes and simplifying and rationalising a very fragmented conduct framework,” he said. The Bill was described as a strategic simplification of conduct laws, and the audience was warned against viewing it as a compliance project or a set of new rules layered over the old. It is an outcomes-based law that elevates financial services provider (FSP)-level accountability over tick-box compliance.
One of the more interesting discussion points was that COFI seeks to reframe conduct regulation away from the financial institution and towards the customer experience. “Boards will become explicitly accountable for culture and customer outcomes … conduct can no longer sit as a compliance function on the side,” Du Toit explained. “Conduct must be governed from the top and founded on a very sound culture.” Each financial institution involved in the customer journey, from adviser to asset manager to bank to insurer, must take responsibility for its part.
Another important trend shift is the move from reactive to proactive compliance, something the FSCA refers to as conduct maturity. In the desired financial services world, fairness is baked into business models, products and services rather than being ‘won’ through enforcement actions such as debarments and fines following poor customer outcomes.
How to navigate the change
The FSCA policy expert offered some thoughts on how regulated entities might navigate the pending COFI change. Step one is to get to grips with the philosophy that underpins the Bill and conduct a robust analysis of how it impacts your firm holistically. “The question I would pose to industry is: Have you considered the impact of the Bill,” he said, before conceding this may be difficult absent a more up-to-date version of the Bill. Step two is to categorise and prioritise the impacts.
According to Du Toit, this more detailed analysis will inform your responses under functions like distribution, product and target market. “We expect COFI to introduce a new level of client segmentation,” he said. You will also have to reflect on your business model and map out activity and licence requirements under the new legislation. And step three, for those who have not yet considered this, is to ensure your data gathering and technology solutions are capable of meeting emerging reporting requirements. Those ready for Omni-Risk Return reporting will have a head start in this area.
The beginning of an era
“COFI is not the end of reform, but it is definitely the beginning of a new era for our sector,” Du Toit concluded, saying that the pending legislation would deliver the “level of conduct maturity” the FSCA desires. He envisioned a future where regulators serve as custodians of the financial sector and its customers, and where financial institutions put the financial well-being of their clients first.
Writer’s thoughts:
COFI is still edging through the legislative process, but the philosophy behind it is clear enough for firms to onboard. Have you started aligning your business to that philosophy, or are you treading water until the Bill is tabled? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
