2. ROAD MAP
APRIL 2010: Treating customers fairly: A discussion paper prepared for the FSB
FEBRUARY 2011: NT released ‘A safer financial sector to serve South Africa better’ commonly known as the “Red Book”, which wide-ranging sets out proposals to reform the financial regulatory system in SA
FEBRUARY 2013: The Red Book was followed by the policy document, ‘Implementing a Twin Peaks model of Financial Regulation in SA (2013)’ (the roadmap), which provided more detailed proposals on implementing the reform of the financial regulatory system
DECEMBER 2013: FSB TCF Baseline study findings published
DECEMBER 2014: National Treasury releases ‘Treating Customers Fairly in the Financial Sector: A Draft Market Conduct Policy Framework in South Africa’
21 AUGUST 2017: The Financial Sector Regulation Bill signed into law, which is now the Financial Sector Regulation (FSR) Act 9 of 2017
11 DECEMBER 2018: National Treasury publishes the draft Conduct of Financial Institutions Bill for public comment, together with an explanatory policy paper

3. FINANCIAL SECTOR REGULATIONS ACT (01/04/18) Regulatory instruments
COFI Bill
FAIS
FMA
PFA
PPR
RDR
CISCA
STIA
LTIA
TCF
Financial Institution Facing
FSCA
Governance
Issue product
Sales & distribution
Advice
Disclosures
Post sales
Outsourcing
Claims & complaints
Regulatory Architecture
Regulator Facing PA PA
SARB Act
Insurance Act
Banks Act
PRUDENTIAL
MARKET & BUSINESS CONDUCT
Regulatory instruments
Standards
Guidance Notes
Interpretation Notes
Inspection
investigations
Administrative
Action
Directives
Enforceable undertakings
Debarment
Supervisory tools
Supervisory tools

4. Market Conduct in current Financial Sector Law
Transactional banking
Retail/SMME credit
Insurance
Investments
Pension Funds
Governance
Banks Act
NCA
LTI/STIA
CISCA
PFA
FAIS
Issuing Products
LTIA
Sales & Distribution
LTIA/STIA
Advise
Disclosure**
LTI/ STIA
Post sale - service
Outsourcing and 3rd management
Banks Act (limited to general governance controls)
Claims and complaints
NCA(Tribunal)
FSOS(indirect -voluntary scheme)
F S O S(indirect - voluntary scheme)
F S O S*(collective investment schemes)
NT Treating Customers Fairly in the Financial Sector: A Draft Market Conduct Policy Framework in South Africa’ (2014)

5. FINANCIAL SECTOR REGULATIONS ACT (01/04/18) Regulatory instruments
COFI Bill
FAIS
FMA
PFA
PPR
RDR
CISCA
STIA
LTIA
TCF
Financial Institution Facing
FSCA
Governance
Issue product
Sales & distribution
Advice
Disclosures
Post sales
Outsourcing
Claims & complaints
Regulatory Architecture
Regulator Facing PA PA
SARB Act
Insurance Act
Banks Act
PRUDENTIAL
MARKET & BUSINESS CONDUCT
Regulatory instruments
Standards
Guidance Notes
Interpretation Notes
Inspection
investigations
Administrative
Action
Directives
Enforceable undertakings
Debarment
Supervisory tools
Supervisory tools

6. What is COFI all about?
Market conduct regulation aims to prevent, and manage when prevention is not successful, the dangers that arise from a financial institution conducting its business in the way that are unfair to customers or undermines the integrity of financial markets and confidence in the financial system.
Represents the holistic legal framework for market conduct regulation in South Africa that is consistently applied to all financial institutions. Replaces conduct provisions in financial sector laws
It is broader than the TCF outcomes - entrenches principles in law
Primarily regulated entity-facing – setting the requirements that financial institutions under the jurisdiction of the FSCA must meet and the outcomes they are expected to deliver.
Gives customers and industry players an indication of what is expected of financial institutions.
Object of Act - promote trust and confidence in the financial sector

7. Risk based & proportionate
What is COFI all about?
New legal framework
Streamlines the legal landscape for conduct regulation in the financial sector and gives legislative effect to the market conduct policy approach.
Will strengthen customer protection by putting in place a single comprehensive market conduct law in the financial sector, resulting in the consistent application of consumer protection principles across the sector.
Gives more flexibility and better tools to the regulator to support emerging new financial institutions.
Gives legal effect to transformation and inclusion requirements in support of targets agreed through the Financial Sector Transformation Council and specified in the Financial Sector Code.
Support competition and innovation
Activity-based
Principles-based
Outcomes focused
Risk based & proportionate

8. Structure of COFI Bill
When interpreting and applying must give effect to objectives of COFI
Must read in conjunction with FSR Act, the FSR Act is an overlay on existing financial sector laws, as well NB definitions – Financial Customer, Financial Institution, Financial Product, Financial Service, Governing Body
No longer ‘tick box’ approach - the FSCA will focus on monitoring the demonstrable achievement of outcomes in the financial sector
Binding principles which reflect outcomes that must be met. Specific parts contain clauses ‘setting out the purpose of the chapter to provide clarity on intended purpose of the legal provisions’
Chapter 3 Culture and Governance Purpose of Chapter 29.
The purpose of this Chapter and any conduct standards prescribed under this Chapter is to set out governance requirements for financial institutions, so that financial customers can be confident that they are dealing with firms and persons where the fair treatment of customers is central to the corporate culture, and in particular, to—
improve confidence in the financial sector by promoting governance that supports the fair treatment of financial customers;
promote the supply of financial products and financial services that are appropriate for targeted financial customers; and
enhance transparency and improved market conduct in the sector

9. Structure of COFI Bill LICENSING (read with Schedule 2)
Chapter 1
INTERPRETATION, OBJECTS AND APPLICATION
Objectives include protecting and promoting the fair treatment of customers, as well as promoting transformation, financial inclusion and innovation in the sector.
It explains how the Bill will apply to financial groups and conglomerates and pension funds
Chapter 2
LICENSING (read with Schedule 2)
New licensing framework for FI
Will replace the numerous different registrations and authorisations in the financial sector with a single market conduct licence from the FSCA, which can have different authorisation categories, depending on the financial activities carried out by the financial institution
Follow a ‘phased process’ for conversion of existing registrations
Provide financial product or instrument
Distribute financial product
Financial advice
Managing and administering investments
Benefit administration
Professional Fiduciary or Custodian Service
Payment Service
Financial Market Activities
Providing benchmarks and related services
Services related to buying and selling foreign exchange
Credit Rating Service
Debt collection service

10. Structure of COFI Bill CULTURE AND GOVERNANCE FINANCIAL PRODUCTS
Chapter 3
CULTURE AND GOVERNANCE
Appropriate governance frameworks and that decision-makers are directly and personally held accountable for weak governance and abusive practices by the FI
Fit and proper requirements
Operational and governance requirements
Mandatory policies
Chapter 4
FINANCIAL PRODUCTS
Clear processes and procedures regarding the design of financial products marketed and sold, including that the needs of financial customers are identified and are targeted accordingly
Senior management is required to sign off on new products
Standards to be issued eg: charging structures, on-going product monitoring
Chapter 5
FINANCIAL SERVICES
Consider the needs, circumstances and expectations of targeted financial customers, when providing financial services.
Allows for specific conduct standards to be set on financial services for matters such as investment administration, services provided to another financial institution, payment services, and benchmark determination

11. Structure of COFI Bill Chapter 6 PROMOTION, MARKETING AND DISCLOSURE
Clear, complete and accurate information on financial product or service across its lifecycle
FI required to have documented processes and procures in place for signing off promotional and marketing materials by a person of appropriate seniority
More consistent disclosures across the financial sector
Standards specifying details on things like Key Information Documents, white labelling, and plain and simple language requirements, inducements and competitions, endorsements, direct marketing, negative marketing
Chapter 7
DISTRIBUTION, ADVICE AND DISCRETIONARY INVESTMENT MANAGEMENT
FI must ensure that their distribution models are appropriate to ensure the delivery of appropriate products and services and, where applicable, provide access to suitable advice.
Conduct standards, including on matters such as product aggregation and comparison services, investment platform administration, referrals and lead generators, and remuneration arrangements
Chapter 8
POST-SALE BARRIERS AND OBLIGATIONS
Consistent approaches and practices within FI once a customer has purchased a product or entered into a contract with a FI – do not face unreasonable post sale barriers when changing, switching, submit claim or complaint
Includes requirements for claims handling processes and complaints management processes, interactions with the relevant financial sector ombud, and requirements for how the information generated through complaints are used within an organisation

12. Structure of COFI Bill REPORTING
Chapter 9
SAFEGUARDING ASSETS AND OPERATIONAL REQUIREMENTS
Deals with institutions that invest, hold, keep in safe custody, control or administer funds of a financial institution, or any trust property – have appropriate safeguards in place
Only applies to financial FI not regulated in terms of another Act, to ensure no overlap with prudential requirements.
FI to have operational capital to perform their required functions
Chapter 10
REPORTING
Annual disclosures to the regulator
The regulator the ability to request information from a FI
Appointment of Auditor to be approved by FSCA
Conduct standards on reporting, public disclosures, accounting and auditing
Chapter 11
REMEDIAL ACTIONS FOR FINANCIAL CUSTOMERS
FSR Act sets out the primary supervisory powers and tools available to the FSCA
This chapter provides greater detail on specific remedial actions - allowing the FSCA to direct a financial institution to provide appropriate redress to financial customers if they have been found to contravene a requirement of the Act or acting without the best interest of the customer in mind

13. Structure of COFI Bill GENERAL PROVISIONS Final Provisions Schedules
Chapter 12
GENERAL PROVISIONS
Sets out the application of COFI in relation to other laws, the process for making conduct standards, for recognising equivalence with foreign jurisdictions and vice versa, and details the process for applications and notifications to the regulator.
Offences and the reporting of contraventions (person is not licensed R15million or 10years imprisonment or both)
A FI may not in connection with a financial product or a financial service engage in conduct that is, in all the circumstances, unconscionable.
Chapter 13
Final Provisions
Deals with savings of existing provisions in terms of specific laws, and transitional arrangements, to ensure the smooth implementation of the COFI Bill once enacted.
The Bill provides for all regulatory instruments (subordinate legislation) made under financial sector law to remain effective despite the repeal of the primary Act
Schedules
Laws amended (including Acts repealed such as FAIS, LTI Act, STI Act, CISCA, Financial Institutions (Protection of Funds Act)
Categories and subcategories of activities requiring licensing
Institutional Form
Transitional arrangements in respect of licensing
Activities of representatives

14. COFI Bill & Retirement Funds
State-owned pension funds / Public sector pension funds
There should be same member protection as those regulated through the PFA
COFI definition of pension fund includes public sector funds
Insert definition ‘public sector pension fund’ in Pension Funds Act, 1956
NT Explanatory Policy Paper:

15. COFI Bill & Retirement Funds
Retirement Fund Benefit Administrators
Currently regulated under the PFA (s13B & BN 24 of 2002)
In future be licensed and authorised under the COFI only as a FI with activity = benefit administration service in respect of pension benefit
Table 5: Benefit Administration
Authorised Activity: Benefit Administration (and Sub activities)
Financial product category
Notes / discussions
Main Product Category
Product Sub-categories
Benefit Administration service: Pension fund benefit administration
Pension benefit

16. COFI Bill & Retirement Funds
RETIREMENT FUNDS (PENSION FUNDS)
Pension fund organisation is a financial institution in terms of FSR Act
Providing a financial product is an activity that a FI is required to be licensed for
This activity includes the activity of a pension fund providing pension benefits to its members
‘benefit’ is defined in PFA as in relation to a fund, means any amount payable to a member or beneficiary in terms of the rules of that fund
Accordingly, a retirement fund will be subject to COFI and be required to be licensed in terms COFI:
Authorised activity:
providing a financial product
Main product category:
pension benefit
Product sub-categories:
Benefits provided by RA Fund, Pension Preservation Fund, Beneficiary Fund, Commercial Umbrella Fund, occupational fund, etc
Annexure 4: Table 1: providing a Financial Product or Instrument

17. COFI Bill & Retirement Funds
RETIREMENT FUNDS (PENSION FUNDS)
Licensed under both the PFA and COFI
The registration of a retirement fund will continue in terms of the PFA.
COFI will impose high-level, binding principles in respect of retirement funds that will be applicable in addition to the various requirements contained in the PFA. Conduct requirements will be migrated from the PFA to the COFI Act.
Various provisions of the PFA will be retained to provide for the separate legal status of the fund and to set prudential requirements
NT Explanatory Policy Paper:

18. COFI Bill & Retirement Funds
RETIREMENT FUNDS (PENSION FUNDS)
Trustees/board of management
Board of management is the governing body referred to in COFI and FSR Act
The COFI Bill introduces as an activity 'professional fiduciary', with ' Professional pension fund trustee service' and Independent pension fund trustee service' as subcategories, who will be licensed under COFI and subject to fit and proper requirements as part of their wider regulatory obligations.
Member elected trustees will not be required to be licensed and the focus will be on continual skills development through training
The board/trustees are accountable for compliance with COFI:
Board must have procedures in place to comply with requirements of COFI and identify non compliance
Boards have to inform the FSCA without delay if it has “materially” failed to comply with COFI

19. COFI Bill & Retirement Funds
Sponsor
Persons who intend establishing funds (sponsors e.g. employer, trade union, financial institution) will have to meet minimum requirements – to ensure fund compliance with licensing requirements before license is issued to fund.
Sponsors not separately licensed.
Authority may prescribe conduct standards regulating and imposing requirements on sponsors of pension funds.
Chapter 4: Financial Products Part 2 Clause 51(3):
(3) Standards that may be prescribed in terms of subsection (1) and (2) may include standards aimed at ensuring that, where financial products are provided to pension funds, or similar member-based entities, where appropriate –
Protections afforded to financial customers by this Chapter also apply in relation to the members of pension funds (or entities): and
Obligation imposed by this Chapter on financial institutions that provide products are also imposed on sponsors of pension funds.

20. COFI Bill & Retirement Funds
Service providers to retirement funds
May be FI or ‘service provider’ or ‘supervised entity’ (not a licensed FI)
financial advice
investment management
asset consulting
actuarial and auditing services
Valuation
In future certain service providers currently licensed under PFA will be licensed and authorised under the COFI only
Authorised Activity: Financial advice
Financial product category
Main Product Category
Product Sub-categories
Financial Advice
Pension benefit
RA fund or Preservation fund
Umbrella and occupational funds (includes all other types of funds listed under the Issuing a financial product activity in relation to issuing of pension benefits (see table 1)
Annexure 4: Table 3: Financial Advice

21. Closing thoughts
NT Explanatory Policy Paper

22. THANK YOU