Leanne Jackson Head: TCF Financial Services Board October 2012

 Why TCF?  TCF in the regulatory framework  The 6 TCF outcomes  Observations from the TCF self-assessment pilot  Considerations for financial advisers (focus on FAIS Category I)  Some TCF self-assessment questions for advisers  Next steps 2

 Assymetry of information between retail financial consumers and financial firms  Unique consumer risks of financial products and service  Holistic, co-ordinated and consistent financial consumer protection regulatory framework needed 3 TCF is an outcomes based regulatory approach that seeks to ensure that specific, clearly articulated fairness outcomes for financial services consumers are demonstrably delivered by financial institutions.

 National Treasury published its policy position for financial sector regulation in “A Safer Financial Sector to Serve South Africa Better” (February 2011)  Policy objectives: (1) Financial stability (2) Consumer protection and market conduct (3) Expanding access through financial inclusion (4) Combating financial crime  Shift to “twin peaks” regulation – prudential regulation under SARB and market conduct regulation (including banking conduct) under FSB 4 Implementing TCF will be a key component of the FSB’s enhanced market conduct mandate

1. Customers can be confident they are dealing with firms where TCF is central to the corporate culture 2. Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly 3. Customers are provided with clear information and kept appropriately informed before, during and after point of sale 4. Where advice is given, it is suitable and takes account of customer circumstances 5. Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect 6. Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint Throughout the product life cycle and value chain! 5

Pilot conduct late Findings relevant to financial advisers:  Assumption that only Outcome 4 (appropriate advice) applies  Reliance on FAIS compliance alone  Wide range of views on responsibility for product knowledge of IFA’s  Role confusion in some distribution models – esp. short-term “binders” 6

 Does your approach to FAIS adequately enable you to demonstrate Outcome 4?  What are you doing about the other five Outcomes?  Are you clear about your TCF responsibilities – at all times - vs. those of the product supplier, underwriting manager, etc?  Are your customers clear on this too? 7

 Who is responsible for TCF in your firm?  How do you measure TCF delivery?  Have your staff been trained on TCF?  How do you take TCF into account when deciding whether to contract with a product supplier? Or whether to market a particular product?  How do you confirm which target market a product is designed for and then ensure you market accordingly? 8

 Do you test the clarity and appropriateness of product material before giving it to customers? What do you do if it isn’t up to standard?  How do you ensure customers get post-sale information when they need it (not only an annual statement)?  Do you insist that product suppliers give you and your reps specific product training?  What level of feedback do you give product suppliers on their products and service? 9

 What controls do you have in place to monitor risk of poor advice by your representatives? Do you monitor their complaints, claims, replacements, portfolio switches?  What do you do to mitigate risks for customers when you discover a problem with the advice?  Have you communicated your service standards to your customers?  How do you support your customers at claims stage?  Do you analyse and act on complaints for TCF purposes? 10

 Final TCF self-assessment tool published  Baseline exercise will follow – will include sample of all FSP categories  Regulatory framework in development through multi-stakeholder steering committee and workstreams  Supervisory framework in development – approach, tools, reporting  Implementation target 2014, subject to “Twin Peaks” developments 11