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Regulatory Reform: The FSB speaks out

04 December 2017Jonathan Faurie
Dube Tshidi, the FSB’s Executive Officer

Dube Tshidi, the FSB’s Executive Officer

The insurance industry is waiting with bated breath for the implementation of Twin Peaks and the effects that it will have on the industry. With the recent passing of the Financial Sector Regulation Act (FSRA) into law, setting the stage for the Financial Services Board’s (FSB) transition to the Financial Sector Conduct Authority, Dube Tshidi, the FSB’s Executive Officer shared his views in a release to the media on the transition and the imminent winding down of the FSB.

He outlines current and future priorities and the steps being undertaken to ensure a smooth transition. 

A major milestone

The passing of the FSRA, which introduces the Twin Peaks regulatory system, is a major milestone for the FSB, but also for the country and specifically the financial services sector and its consumers. 

“Naysayers have said that the Financial Sector Conduct Authority (FSCA) will still be the FSB, just with a different title and renamed portfolios. However, the reality is that the mandate of the new entity will be much wider than that of the FSB.  Whilst in some cases there may, on the face of it, not be a significant difference, the scope is significantly broader with a much wider reach. It is not just the jurisdiction of the FSCA that changes: the FSRA also dictates a shift in approach, requiring the conduct Regulator to be more pro-active and pre-emptive,” said Tshidi. 

He added that in order to do this, the Regulator will need to be highly data-enabled with strong research capabilities, requiring the recruitment of a different skill set to ensure that it moves forward and shifts its approach to meet these objectives. Internally, the organisation is being restructured to be more functionally-focused as opposed to its current sectoral approach.  This will enable a much greater degree of consistency across industries.  

A lot of voices heard

While the Act has been subject to criticism, as there always will be when major change is introduced, Tshidi said that it cannot be forgotten that Parliament went through an extensive consultative process and considered many views in processing the Bill. 

“Issues around regulatory costs and the necessity of the dual regulatory system were raised and addressed by National Treasury through a cost-benefit study. It should also not be overlooked, and is important to state again, that the negative impact on the financial system, economy and consumers associated with the failure of financial institutions, as recently experienced because of the 2008 global financial crisis, necessitates regulatory reforms to close gaps and ensure that entities are comprehensively regulated. While this will lead to some increase in regulatory cost, it is deemed necessary, and we will closely monitor these to ensure they are in line with industry norms,” said Tshidi. 

He added that leading on from this, the Act will be implemented in phases to ensure a combination of minimal disruption to the industry and maximum understanding and consensus. 

“Through our existing Twin Peaks forums, we are engaging with the industry to ensure that they are kept current with the implementation process, and we have been hosting multi-stakeholder dialogue sessions through various media platforms to ensure that all stakeholders are kept abreast. The next step will be to officially launch our strategy and the new brand in 2018,” said Tshidi. 

Slow and steady

Tshidi warns that this cannot be a quick process for the sake of speed alone. “We have identified immediate priorities to transition the FSB to the FSCA. With regards to the process following the enactment of the Bill, it is estimated that a period of at least six to eight months will be required before it can be fully implemented,” said Tshidi.   

He added that the Minister is empowered to provide for different dates of effectiveness for provisions of the Act. “For the FSCA to be established, the Act states the Minister must follow a process of appointing a Commissioner and Deputy Commissioners. To that end, draft regulations setting out the process will be published for public comment. Internally, we will continue with our regular and repeated engagement with all staff members to ensure a seamless transition and to finalise internal reorganisation,” said Tshidi.   

This process also ensures smooth transition to the FSCA for cases or investigations that are currently before the FSB.  The FSR Act specifically provides for the possibility that supervisory issues or legal proceedings may not be finalised, and deals with the process of how such pending cases should be dealt with. The Act also specifies that all rights and obligations of the FSB will pass to the FSCA. 

“We will monitor the impact of the new legislation as it is implemented to ensure that the new system works effectively and efficiently with an unwavering focus to promote and maintain a sound financial investment environment with consumer interests at its heart,” concluded Tshidi. 

Editor’s Thoughts:
As with most issues regarding regulation, everyone has their own opinions and concerns regarding the impact that regulatory reform will have on their business. It is impossible for the FSB to take heed of every concern in the industry; however, have they considered the concerns of a wide enough base to ensure that unintended consequences are minimised? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

 

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