“It is encouraging to see that the FSCA has made progress in its first year of existence, as evidenced in the pages of this annual report. The performance recorded herein demonstrates that the FSCA is hard at work on its critical roles of ensuring that financial customers are treated fairly and that the industry plays its part in helping to address the national imperative of reducing poverty, inequality and underdevelopment,” Tito Mboweni, Minister of Finance shares in the foreword of the just-released FSCA annual report.
The establishment of the FSCA
The adoption of the Twin Peaks model gave birth to the Financial Sector Regulation (FSR) Act, 2017 (Act No.9 of 2017), the legislation that created the Prudential Authority (PA) housed in the SARB, and the FSCA, South Africa’s first-ever conduct regulator for the sector.
“The scope of the FSCA mandate is much wider than that of its predecessor, the Financial Services Board (FSB), as the FSCA now also has oversight over the market conduct of banks and services related to credit providers. The broadened scope potentially brings a large number of approximately 23 093 of additional entities into the regulatory net of the FSCA,” Abel Sithole, Commissioner of the FSCA explains in the report. “Although the regulation of market conduct is the core mandate of the FSCA, the FSCA considers stakeholders in the financial sector such as government, private entities as well as other associations and policy authorities as collaborators in achieving the goals set out in meeting its statutory objectives.”
The FSCA comprises 7 core divisions that are directly responsible for implementing its legislative mandate, namely, the supervision of market conduct in the financial sector. In addition, the FSCA’s mandate includes ensuring that its regulatory and supervision standards are in line with international standards.
Progress against strategic goals
Sithole points out that “Building a new organisation” was the first area of focus during the year under review. “We dedicated our energies to laying a solid foundation,” he emphasises. “We had a necessary level of internal focus to build an organisation that is appropriately structured, and adequately resourced to achieve our expanded mandate. The new environment requires that we recruit specialist skills in areas like banking, data analytics, and financial technology. To this end, the FSCA undertook an organisational redesign and capacity building programme, which helped to ensure a smooth transition from FSB to the new regulatory environment.”
The 2nd strategic goal focusses on “an inclusive and transformed financial sector”. “The FSCA priority areas support the National Development Plan goals of eliminating poverty and reducing inequality by 2030, and thus transformation and inclusion are prominent parts of our strategy. During the year under review, we focused particularly on the role the FSCA can and must play to drive the national policy imperative to achieve broad-based black economic empowerment for all South Africans,” Sithole clarifies.
The FSR Act further introduced a world-first for financial consumer education in that it empowers the conduct authority to write standards for consumer education in the financial sector. During the year under review, the FSCA has committed to providing financial education programmes to existing and potential financial customers, as well as promote financial literacy to the wider society so that existing and future financial customers can be equipped with the knowledge and tools necessary for making informed and beneficial financial decisions.
Other strategic goals include “A robust regulatory framework that promotes fair customer treatment” as well as “Proactive stakeholder management”.
“We are excited to be forging ahead as a conduct regulator whose main and ultimate focus is the protection of the ordinary man and woman on the street. We will continue to work diligently and smartly to achieve our objectives and look forward to reporting on these in the next financial year,” Sithole concludes.
The proof of the pudding
Those of us who lived through the early years of FAIS will remember that it was a huge challenge setting up an entirely new regulatory structure. Whilst the FSCA will no doubt be able to build on the experience gained since September 2004, there are also many new challenges, not least of which is achieving the stated goal of being pro-active. What bodes well is the increasing consultation and cooperation between the industry and the regulator, which leads to better-aligned goals and more satisfactory outcomes for all.
Click here to download a table that sets out the strategic objectives, performance indicators and planned targets as specified in the FSCA’s APP for 2018/19, and actual performance for the year.
Click here to download the 147-page Annual Report.
