The South African financial services sector has undergone sweeping regulatory reform over the past 15 years, aimed at improving the governance and accountability of financial institutions. These reforms have been crucial in securing better outcomes for the people served by the sector. The Conduct of Financial Institutions (COFI) Bill represents a major leap forward and will have far-reaching implications for all financial institutions. It further promises to transform the landscape of financial regulation in South Africa.
1. How COFI differentiates itself from existing regulations
A significant aim of the COFI Bill is to streamline the legal landscape for conduct regulation in the financial sector, as well as to apply the market conduct policy approach to law. This is not just a minor adjustment but a substantial shift that aims to create a uniform regulatory framework across all financial sectors.
The introduction of a comprehensive market conduct law will ensure that consistent consumer protection principles are applied, offering enhanced protection to customers of financial institutions.
A key objective of the COFI Bill is to protect customers of financial institutions, ensure their fair treatment, and promote financial inclusion, as is the case with all current market conduct regulations, including the Policyholder Protection Rules. Nevertheless, in order to achieve these objectives, COFI will establish a consistent approach to understanding, applying, and enforcing the treating customers fairly (TCF) principles throughout each industry and across all regulations.
2. When it will come to effect
The Financial Sector Conduct Authority (FSCA) has said it believes National Treasury’s intent is for it to be tabled for Parliament’s approval this year.
3. The benefits of COFI
A key aspect of the COFI Bill that’s under the spotlight at the moment is the Omni-Conduct of Business Return (Omni-CBR) reporting system, which aims to formalise data collection in the industry. By levelling the playing fields and moving towards an activities-based regulatory regime, the bill will assist in creating and preparing an environment that is primed for more innovation within the industry.
The Omni-CBR will be the new off-site monitoring tool developed by the FSCA, which will require financial institutions to report in detail on conduct indicators and customer outcomes, including issues such as business composition, complaints-handling, and policy cancellations.
By supporting a more consistent and formalised data framework across the industry, it will allow the FSCA to compare data across industry players, quickly identify issues and outliers, and act swiftly against any institute that is failing to deliver fair outcomes.
4. Promoting the Treating Customers Fairly (TCF) outcomes
A key aspect of COFI is enforcing the TCF outcomes. By providing detailed guidance on how institutions must conduct themselves in order to comply with these outcomes, and by supporting reporting in the industry that support careful monitoring of conduct indicators, COFI will equip the regulator to identify and remediate breaches, and to act against the perpetrators of poor market conduct.
It will also equip financial institutions themselves to better understand how their business is delivering for clients – which, ultimately, will serve to improve customer satisfaction and retention, supporting more sustainable business practices and contribute positively to the bottom line.
The road ahead
The lack of certainty around a declaration date may lead some financial institutions to put off thinking about COFI until some future date. As is the case with any change, COFI will bring new opportunities with it and financial institutions who embrace it will fare well in the COFI era.
A good place to start is to focus on is reporting through identifying the various data sources in your business that will help you understand how you are performing in terms of customer outcomes. This should include collecting customer feedback, analysing the feedback, and implementing steps to address any issues you pick up in the process. The sooner you start gathering and interrogating this data, the better equipped you’ll be to comply with COFI.
This article was originally published on Insurance Biz on 4 September 2024 and is attributed to Glenn Hickling, Head of Legal at BrightRock. Read the original version here.
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