Digital overhaul promises tougher scrutiny for intermediaries
The more effective the technology-backed tools that financial advice professionals use, the better the outcomes for consumers. This also applies to financial sector regulators who must embrace technology to deliver on their dual mandate of industry oversight and consumer protection.
Collaboration to shape behaviour
Katherine Gibson, Deputy Commissioner of the Financial Sector Conduct Authority (FSCA), used her time at the FPI Convention 2025 to update attendees on the authority’s operational achievements and the latest regulatory developments. To begin, she noted that the FSCA favoured working with sector stakeholders to shape behaviour, best practice and consumer outcomes over a ‘big stick’ enforcement approach. This does not, however, translate to a light-touch approach when transgressions occur.
The Conduct of Financial Institutions (COFI) Bill was the first item on the presenter’s agenda. After conceding that it was taking “too long” for the Bill to make its way into law, Gibson praised the framework as entity-facing legislation linked to the activities an entity is involved in, as opposed to separate laws and regulatory requirements linked to an institutional structure. “The COFI Bill is a National Treasury-led, Parliamentary-sanctioned piece of legislation,” she said, and the timing of its enactment is out of the FSCA’s hands.
The Deputy Commissioner said the Bill was sitting with the Minister of Finance pending submission to Cabinet before making its way to Parliament, but made no attempt to guess when it would be enacted. Instead, she explained that the FSCA had taken a strategic decision to use existing regulatory instruments to position for the activity-based and outcomes-focused regime that the COFI Bill intended. “We have already started thinking about what COFI means for us, and how we would implement its intention,” she said.
No, not the Inland Revenue Service (IRS)
The recent Banking Conduct Standard was offered as an example of this process. The FSCA was able to apply some of COFI to banks on a principles basis and can do similar things using its existing toolset in the event the Bill is further delayed.
One of the unanticipated benefits of the delay is that the conduct authority has extra time to fine-tune its sup-tech solution to offer a single-entity view suitable for the post-COFI world. The Integrated Regulatory Solution (IRS) will redefine how the regulator requests, collects and analyses information. It offers a single view of regulated entities and serves as a centralised data repository.
The IRS development was led by all three of the FSCA Deputy Commissioners with inputs from senior management to identify the most critical risk indicators for the broader financial sector. These factors form the basis for the OMNI-Risk Return which replaces the previously contemplated Conduct of Business Return (OMNI-CBR). Readers who want more information on the Risk Return can link through to FAnews’ recent coverage in a piece titled Advisers and brokers face expanded scrutiny under the OMNI-Risk Return.
The presenter noted the phenomenal level of interest shown during the OMNI-Risk Return consultation process, and reminded the audience of the 30 November 2025 deadline for written comments on the draft. Commenting on the IRS timelines, Gibson said there were many moving parts and that the system would likely go live towards the end of 2026. “There will be an industry pilot that runs around the middle of next year, and that is going to be crucial for us in continuing to iron out any bugs,” she said.
Too many unregulated players
The Financial Planning Institute of South Africa (FPI) Convention 2025 programme shone a spotlight on the many non-FSP individuals offering advice outside of the regulatory framework. “The role of finfluencers in advice is an area of interest for us, and we are gathering more information to better understand their role,” Gibson said. A first step is figuring out the nuances between finfluencers and influencers in addition to the different models used by each category.
The regulator is concerned that incentivised finfluencers and influencers are steering consumers into dangerous, unregulated sectors. Consumers, young and old, are being lured in with promises of easy money from crypto and foreign exchange trading platforms, not to mention online gambling. As an aside, there is no shortage of news articles lamenting how much money South Africans are throwing at online gambling sites. Reuters reported a 550% increase in online gambling turnover over the past four years, running to R1.14 trillion in 2023-24.
Research conducted by the FSCA and others suggests finfluencers fall into three main categories: those who report on their experiences with financial products, allowing viewers to draw their own conclusions; those who post their experiences in return for remuneration; and those who promote their own businesses, especially in the trading space. “There is a strong aversion to self-proclaimed experts because of their lack of qualifications, although some banks and insurers have used lifestyle influencers to market their products,” Gibson said.
Is a Conduct Standard for Finfluencers on the cards?
At this stage the survey feedback is that finfluencers should not be regulated, but the FSCA is less certain. “Our sense is that finfluencers may need some regulatory intervention, starting from a guidance perspective,” the presenter said.
She argued that those giving advice about a financial product should fall within the Financial Advisory and Intermediary Services (FAIS) framework, irrespective of who they are. To being with, the conduct authority proposes keeping a close eye on the type of information being peddled by finfluencers, alongside potential conflicts in remuneration.
But it is only a short hop from this guidance role to adding a special category of individuals to the ‘institutions’ regulated under COFI. Who knows, perhaps five years from today we will see a licensing requirement for individuals in the content creation space and a separate conduct standard for financial journalists, influencers and similar. The counter argument would be that proper enforcement across the financial services sector would leave finfluencers with few opportunities to peddle harm.
There could anyway be bigger threats in the wings. What happens, for example, if the influencer in question is created using artificial intelligence (AI). The FSCA shared some of the findings of its recent survey of how product providers are using AI. “There is relatively low adoption that is very skewed by entity type, particularly banks and insurers,” said Gibson. Survey respondents shortlisted data analysis, productivity and optimisation of internal processes as use cases for traditional AI whereas generative AI featured strongly in the sales and marketing functions.
Key risks in AI adoption
Data privacy, the protection of personal information and cyber security were singled out as key risks in AI adoption. Survey respondents were also concerned over explainability and the lack of talent in the field. “There is no specific law around AI, but that does not BREAK exonerate financial institutions from considering good customer outcomes if and to the extent they are using the technology,” Gibson explained. Those adopting AI must pay close attention to data quality, ethics, governance, risk management and the explainability of outcomes to name a few.
The presentation offered a brief refresher of regulatory actions taken by the FSCA over the latest reporting period. A dashboard slide confirmed 131 debarments; 107 public warnings; 14 enforceable undertakings; 382 licences withdrawn; 13 directives issued; and around R119 million in penalties in 2024. You can find a full FAnews write-up on these in FSCA sends clear signal on its future enforcement focuses. Gibson encouraged the audience to review the FSCA Regulatory Actions Report for more insights on how market conduct is being shaped.
Clamping down on con-artists and scams
The exponential rise in financial scams stood out as a major challenge for regulators. According to Gibson, these scams threaten the integrity of the financial system even though they often fall outside the regulator’s direct mandate. Rather than trying to fight every instance, she suggested focusing on educating consumers to respond differently to scams. Advisers can play their part by dealing only with regulated and registered entities and by being methodical in matching products with clients’ needs and risk tolerances.
Writer’s thoughts:
The FSCA appears justified in its concerns over the rise of finfluencers and influencers peddling all manner of financial product and advice. Should social platforms be allowed to deliver responsible advice without regulatory oversight? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
