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The future role of the FSCA in a key industry

10 October 2017Jonathan Faurie
Dube Tshidi, Executive Officer of the FSB

Dube Tshidi, Executive Officer of the FSB

Over the past two years, government and National Treasury have been on a proverbial mission to drive economic transformation within the country. It seems as if the years of talking about it is finally being put into action. Part of this agenda is the transformation of the financial services industry. We are already familiar with the wave of regulatory reform that is being carried out in the industry, and we are aware of the Financial Services Board’s (FSBs) changing agenda once the Twin Peaks Bill is passed.

The FSB will transform into the Financial Sector Conduct Authority (FSCA); we are now starting to get more clarity on what this means and Dube Tshidi, Executive Officer of the FSB, addressed this matter in the 2017 FSB Annual Report.

A matter of seriousness

He pointed out that the FSB really does take its role of protecting consumers very seriously. “To this end, I’m happy to report that the first draft of legislation concerned with the conduct of business is currently being finalised. This law, called Conduct of Financial Institutions (CoFI) Bill will essentially replace many of the different sectoral laws that deal with market conduct, substituting the fragmented sectoral approach with a single market conduct law that is comprehensive and proportionate,” said Tshidi.

Although the Bill is only going to be implemented in the second phase of the Twin Peaks process, several regulations are being prepared to ensure that market conduct guidelines are clearly articulated.

“For instance, our Insurance Division has spearheaded the process of amending the Insurance Acts to ensure that regulation such as the Policyholder Protection Rules (PPRs) are enhanced. To date, proposed replacements of current PPR notices have been published through the Government Gazette and will be effective in the following financial year. To provide further protection for consumers we are continually improving the Retail Distribution Review (RDR) proposals to ensure that incentives paid to advisers promote fair treatment of customers,” said Tshidi.

Fit and proper

In addition to RDR and Treating Customers Fairly, the third important piece of legislation being implemented is the requirements governing Fit and Proper Conduct.

“The requirements introduce continuous professional development and training requirements to ensure that financial advisers are fully knowledgeable about the financial products they sell and the market they serve. This will help to build even more confidence and trust in the financial services industry,” said Tshidi.

The transformation agenda

If we read between the lines, we can see that there is a general feeling that there is a lack of trust when it comes to the financial services industry. Further, the FSB at times stops very short of placing the blame of this squarely on the shoulders of advisers.

This is evident in the fact that that the FSB has placed the burden of accountability firmly in the court of advisers. Adhere to TCF, RDR and Fit and Proper requirements to prove that you are treating customers in an appropriate manner.

The industry is full of professionals who have been in it for a number of years, so when they say that regulatory reform will result in unintended circumstances within the industry, we kind of want to put a firm bet on that happening.

In many cases, the industry has very little faith in the intentions of the FSB. And a house divided against itself will fall. The industry needs to trust the FSB again, but the FSB needs to equally give the industry a reason to trust it.

Editor’s Thoughts:
To the FSBs credit, it is engaging with the industry a lot more when it comes to regulatory reform. However, it is the point of this engagement that gets people hot under the collar. Nobody denies that the rules governing the industry need to change, but implement laws that the foot soldiers of the industry will be comfortable with. Perhaps this is the key ingredient that is missing when it comes to industry transformation? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Begley, 11 Oct 2017
Lets hope that the " Fit and Proper " conduct as well as continuous professional development and training requirements , spills over into insurance companies and not only intermediaries .Insurers must be able to conduct themselves in a professional manner and advise intermediaries and clients correctly and professionally. This includes telephone advice from direct insurers .
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Added by Ayanda, 10 Oct 2017
I am afraid that Twin peaks, Cofi, et al, has far less to do with transformation and consumer protection than with a massive power grab and with creating and protecting jobs for more civil servants.
By their own admission, cost will at least quadruple, but benefits will be minuscule for the average policyholder and advisor, all of whom will be paying for the jobs, medical aids and pensions of these wards of the state.
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