COFI Bill – big changes ahead for FSPs
Samantha Williams
As South Africa's regulatory landscape continues to evolve, it’s crucial for financial service providers to stay ahead of the curve. With the COFI Bill poised to fundamentally reshape the way financial institutions operate and engage with clients, FAnews believes this article, written by Samantha Williams, Head of Legal and Regulatory Affairs at the FIA, provides important insight into the shifts underway - and why now is the time for FSPs to start preparing.
South Africa’s financial sector is facing one of the most significant regulatory overhauls in decades — and it could change the way banks, insurers, and other financial institutions treat their customers. The Conduct of Financial Institutions (COFI) Bill, currently moving through the legislative process, is more than just a compliance update. It represents a bold shift towards a fairer, more transparent, and customer-focused financial system. But what does it really mean for advisors, and why should you care?
While it had been hoped that the Conduct of Financial Institutions (COFI) Bill would reach Parliament between February and April 2025, we understand that the Chief State Law Advisor has required additional amendments, and until the Bill is certified by the State Law Advisers, it cannot proceed to Cabinet, let alone Parliament. Nevertheless, it is hoped that the Bill will make its way to Cabinet by the end of this year.
In the interim, the FSCA is using its powers under the Financial Sector Regulation Act (FSR) to advance key initiatives in preparation for the COFI Bill’s implementation. To support this transition, the COFI Transition Working Group has been established, on which the Financial Intermediaries Association (FIA) is represented by Samantha Williams (Head of Legal & Regulatory Affairs) and Ronald King (Vice President of the FIA and Head: Public Policy & Regulatory Affairs at PSG). Sub-working groups dealing with the proposed "fit and proper" framework and the "risk and compliance" framework have begun closed forum consultation with industry stakeholders. These early engagements are critical, as they allow subject matter experts to share practical insights and help shape the regulatory frameworks before broader industry consultation begins. By the time wider consultation takes place, much of the technical groundwork will have been laid, making the process more efficient and constructive. Additional consultations on other frameworks are expected to follow throughout 2025.
Broader industry consultation will take place once various refinements have been made. Plans to consult on several additional frameworks throughout 2025 are also expected to progress in due course.
What advisers need to know
The FIA regards COFI as perhaps the most crucial piece of legislation that directly affects the business of our members as financial intermediaries, since the advent of the Financial Advisory and Intermediary Services Act (FAIS Act). The FIA has always regarded current legislation and in particular the FAIS Act as being generally well designed and appropriate in establishing market conduct. It is yet clear how its replacement by primary legislation intended to apply across all financial services will be sufficiently focused to clearly inform sub-sectors (like intermediaries) that have significant differences across product, distribution and operational lines, where even sectoral lexicon and language is different.
The FIA has made two detailed submissions on the Bill and has participated in the discussions on the Bill at the National Economic Development and Labour Council (Nedlac) through Business Unity South Africa (BUSA). Some of the key issues which we commented on were as follows:
- Dual regulation with CMS
The FIA are concerned that the burden of dual regulation on advisors in respect of medical schemes creates an unlevel playing field for advisors in this space. While we have no objection to the CMS’s continued role in relation to schemes themselves, it seems unnecessary for there to be continued dual regulation in respect of advice. This results in an additional cost and administrative burden for advisors.
- Proportionality
The Bill states that the Authority may, on application by a financial institution, key person, representative or contractor, or on its own initiative, exempt financial institutions, key persons, representatives, or contractors from the application of this Act, or a part, provision or requirement of this Act.
While in principle this seems reasonable, concern was expressed that this can lead to a potential unlevel playing field where concessions are permitted for some (e.g. sandbox and fintech initiatives), and not others.
The section on governance also uses terminology like ‘governing body’ which is not defined, and many smaller businesses may not have a governing body, which also raises concerns from a proportionality perspective. Similarly, references to ‘corporate culture’ may be inappropriate for smaller organisations and retirement funds.
- Financial statement requirements
The Bill required public disclosure of qualitative and quantitative data. Furthermore, it stated that - A financial institution must submit its audited annual financial statements to the Authority and make them available to the public within the prescribed period after its financial year-end.
Concern was expressed by the FIA about the requirement for public disclosure for all financial institutions. The requirement to submit audited annual financial statements in terms of the Companies Act (Section 30), applies only to public companies. Different requirements apply for other companies (Section 30 (2)(b)).
What FSPs should be doing NOW
Immediate Strategic Response to Delays
Dual-Track Preparation:
Intermediaries should begin their preparations for COFI implementation while simultaneously monitoring the FSCA's alternative approaches through the FSR Act. While this approach may result in some fragmentation—with standards split between the FSR and COFI once COFI is enacted, the overall regulatory objectives will still be met.
- Engagement with FSCA Frameworks
Active Participation:
As noted above, the FIA is currently participating in the COFI Bill Transition Working Group and sub-working groups, and we will keep members informed as permitted and appropriate. We encourage intermediaries to monitor for formal consultations expected throughout 2025 under either COFI or the FSR Act and engage robustly with these proposals.
- Accelerated Readiness Planning
Enhanced Urgency:
As FSCA Commissioner Unathi Kamlana emphasised: "readiness is not just the responsibility of the FSCA—it is an industry-wide imperative. Financial institutions must proactively align their business models, governance structures, and compliance strategies with COFI principles and expectations."
Don't wait for the Bill's passage—implement COFI-aligned practices now.
Licensing preparation:
All FSPs will need to be re-licensed once COFI comes into effect, and it is recommended that intermediaries begin detailed activity mapping for future activity-based licensing requirements.
- Operational Implementation
Core Requirements (unchanged but more urgent):
- Strengthen governance structures and adherence to fit and proper standards
- Ensure your customer treatment practices are aligned with TCF principles
- Implement robust transformation policies
- Ensure adequate financial resources and operational capabilities
- Develop activity-based compliance frameworks
- Risk Management
Regulatory Uncertainty Management:
FSPs should aim to build flexibility into their compliance systems to accommodate either COFI or FSR Act implementation, ensuring readiness for rapid implementation once clarity emerges.
Bottom line - June 2025 update
The COFI Bill's further delays beyond Q2 2025 demonstrate the ongoing uncertainty around timing, but the regulatory direction remains unchanged. As the FSCA noted: "the COFI Bill has taken a bit of a while to get to where it is, but the COFI Bill is the reality of how the financial sector in South Africa will be regulated, certainly from a conduct perspective, so it is not going away."
Key takeaway
The delays actually make preparation MORE urgent, not less. The FSCA is moving ahead with its regulatory agenda regardless of the Bill's status, and intermediaries who aren't ready risk being caught off-guard by rapid implementation once political and legislative bottlenecks clear.
The current environment requires intermediaries to maintain implementation readiness while staying agile enough to adapt to the FSCA's contingency approaches through existing legislation.
The FIA is here to support you through this journey and will keep you abreast of developments as they happen.
Writer’s Thoughts
While the legislative timeline remains uncertain, one thing is clear: the momentum toward a more robust, transparent, and customer-focused financial system is unstoppable - FSPs that act now will be far better positioned for the changes ahead. Do you agree? Please comment below, interact with us on X at @fanews_online or email me your thoughts at myra@fanews.co.za
