This series of articles is inspired by legendary author, the late Stephen R Covey, whose bestselling book, The seven habits of highly effective people, impacted millions of people around the world. FSPs will do very well to consider the habits highlighted in these articles.
The first habit
In the first article on the essential habits of highly successful FSPs under COFI, I highlighted the importance of defining reality and to be proactive. The reality is that the Conduct of Financial Institutions Act (COFI) is upon us, and it will impact your business. Best be proactive and start preparing for the next wave of regulatory reform.
The second habit – Seek first to understand, then to be understood
In the previous article (Part 1) I highlighted that it will not simply be business as usual under COFI. It will be necessary to reassess, and stress-test your business and your client engagement process before conducting business under the new Act. My advice: Seek first to truly understand the fundamentals of COFI before expressing an uninformed opinion and potentially leading your team in the wrong direction.
In the previous article I mentioned that one of the first aspects of any piece of legislation that one needs to understand is the purpose or objective of the Act. The second aspect of COFI that is of importance is to understand COFI in the broader context of the legislation.
COFI and the Financial Sector Regulation Act
COFI does not stand on its own. It must be read with the Financial Sector Regulation Act as the FSR Act created the regulatory foundation for COFI to exist. For purposes of this article, I will only highlight the key objectives that are specifically applicable to FSPs:
– To establish a system of financial regulation by establishing the Prudential Authority and the Financial Sector Conduct Authority, and conferring powers on these entities;
– To preserve and enhance financial stability in the Republic by conferring powers on the Reserve Bank;
– To regulate and supervise financial product providers and financial services providers;
– To improve market conduct in order to protect financial customers;
– To provide for coordination, co-operation, collaboration and consultation among the Reserve Bank, the Prudential Authority, the Financial Sector Conduct Authority, the National Credit Regulator, the Financial Intelligence Centre and other organs of state in relation to financial stability and the functions of these entities;
– To provide for making regulatory instruments, including prudential standards, conduct standards and joint standards;
– To make provision for the licensing of financial institutions;
– To make comprehensive provision for powers to gather information and to conduct supervisory on-site inspections and investigations;
– To provide for the protection and promotion of rights in the financial sector as set out in the Constitution;
– To provide for coverage of financial product and financial service providers by appropriate ombud schemes;
– To establish the Financial Services Tribunal as an independent tribunal and to confer on it powers to reconsider decisions by financial sector regulators, the Ombud Council and certain market infrastructures.
