Blue Chip Issue 86

FINANCIAL PLANNING | Legislation
BLUE
CHIP
At the time of drafting this article, it is industry’s
understanding that National Treasury is intending to
submit the Conduct of Financial Institutions (COFI) Bill
to Cabinet in the first half of 2023. When promulgated,
COFI will replace the Financial Advisory and Intermediary Services
(FAIS) Act and many other pieces of financial services legislation.
The purpose of this article is firstly to create awareness, so that
financial services providers (FSPs) will know what is coming in
2023, and secondly, to provide some perspective on what the
impact is going to be on FSPs. Lastly, to assist Key Individuals and
representatives to prepare mentally for the transition from FAIS to
COFI, which will happen in various stages over the next few years.
To say that the capacity of financial
services providers has already
been stretched beyond the limit
would be an understatement.
Recognising the frustration
Amid all the challenges and changes that financial advisors
and intermediaries have had to endure over the years since
the implementation of the Financial Intelligence Centre Act
in 2001, the FAIS Act in 2004, Retail Distribution Review (still
ongoing) and the more recent implementation of the Protection
of Personal Information Act, I think it is fair to say that most
advisors and intermediaries are “legislatively exhausted”. If we
add the ripple effects of Covid, the crippling effect on businesses
due to loadshedding, the ongoing political chaos, corruption,
general lawlessness, and how all these factors impact the South
African economy negatively, I for one do not blame advisors and
intermediaries who find it hard to be filled with enthusiasm for
COFI to be introduced.
To say that the capacity of financial services providers
has already been stretched beyond the limit would be an
understatement. I have yet to find an advisor who does not
believe that we are totally over-regulated as it is. In short, the
world of advisors in South Africa is beyond a perfect storm
already. Unfortunately, we have little choice but to brace
ourselves for the next regulatory wave if we want to transition
from FAIS to COFI effectively. I salute those who have been
resilient enough to keep on going but, as if the recent past
has not been challenging enough, your business will need yet
another facelift as COFI is upon us.
with the FSCA for activities as defined in the COFI Act when it
comes into effect. The second observation is that the current
FAIS Act, the fit and proper requirements, the FAIS General Code
of Conduct, and a few Board Notices consist of approximately
160 pages of legislation. COFI must be read with the provisions
of the Financial Sector Regulation (FSR) Act and the Conduct
Standards that will replace the provisions of the FAIS General
Code of Conduct. When COFI comes into effect financial services
providers will have to deal with over 900 pages of market conduct
legislation, excluding FICA and POPIA. Purely from a volume point
of view COFI is going to be like FAIS on serious steroids.
I would not blame you if you wanted to stop reading at this
point and shout, “When is this going to stop? Enough already!”
but it is important that you read on after taking a moment to
regain consciousness...
The importance of perspective
Welcome back! Based on my experience in the industry over a
period of more than three decades, some people will react to the
changes, and some are going to respond. Although thesauruses
use these terms interchangeably, in practice a reaction is usually
quick, without taking time to process or considering all the facts,
and it is full of emotion. A response on the other hand is usually
a reply after taking a breath to get past any emotional reactions,
carefully considering the facts and circumstances, and gaining
insight and perspective. It is of vital importance that you resist
the temptation to (over) react.
The impact of COFI on FSPs
The first thing that FSPs will have to consider is that, subject to
transitional arrangements, all FSPs will have to be re-registered
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