Hello Trusted Advisors,
As trusted advisors in the South African financial industry, it is important for us to stay informed and up-to-date on the changes that will be taking place in the regulatory landscape in the near future. Today, we will be highlighting the transition from FAIS to COFI in the financial advisory market.
The transition to COFI represents a shift in regulatory focus from the re-licensing and registration of financial services providers to ensuring that financial institutions conduct their business with due care, skill, and diligence, in the interests of customers and the integrity of the financial system. COFI marks the full integration of all six treating customers fairly outcomes into the new legislation
To help you understand this transition, I will outline five key points:
1. COFI aims to further improve customer protection
COFI has been designed to improve customer protection by enhancing market conduct standards, introducing conduct accountability for senior management, and strengthening the enforcement regime. The ultimate goal is to ensure that all financial institutions put the interests of customers first, and conduct business with integrity and treat their customers fairly.
2. COFI is primarily principles-based
COFI represents a more principles-based approach, unlike FAIS, which is more of a rules-based regulatory system. This means that instead of focusing on specific rules, COFI focuses primarily on fair outcomes for customers. This approach is designed to be more flexible and adaptive to changing conditions, while still maintaining a high level of customer protection.
3. COFI introduces conduct accountability for senior management
Under COFI, senior management at financial institutions will be held accountable for the conduct of the institution and its employees. This means that the people in charge will be responsible for ensuring that their institution behaves ethically and responsibly and that customers are treated fairly. This is designed to create a culture of responsibility and accountability at all financial institutions.
4. COFI strengthens the enforcement regime
COFI introduces a range of new enforcement tools and powers to ensure that financial institutions comply with the new conduct standards. These tools include fines, penalties, and the power to suspend or revoke licenses. This is designed to ensure that financial institutions take the new conduct standards seriously and do not engage in unethical or irresponsible behaviour.
5. COFI will change how financial institutions do business
The transition from FAIS to COFI will require financial institutions to rethink their business. Putting the interests of customers first and ensuring that their products and services are designed with the customer in mind has never been more important. This may require changes to business models, processes, and procedures, as well as new training and education programs for management and employees.
In conclusion, as trusted advisors in the financial industry, it is important for us to be aware of the regulatory changes that will occur in the near future. The transition from FAIS to COFI will bring significant changes that aim to improve customer protection, ensure fair treatment of customers, and demand a culture of responsibility and accountability at all financial institutions. I encourage you to stay informed and seek further information as needed so that we can continue to serve and support you as you prepare for the transition.
Yours in Trust,