The FSCA has provided an update on how it is progressing with a number of regulatory frameworks that will apply across the financial services sector, including to FSPs.
The details are contained in the FSCA’s “Regulation Plan: 1 April 2022 to 31 March 2025”, which was released last week.
The Authority said it will focus on the following “high-priority” regulations over the next three years:
Conduct standard: financial consumer education initiatives
The FSCA said it is developing a draft conduct standard that will require all financial institutions to take “reasonable” steps to ensure appropriate standards of behaviour, put in place governance and oversight arrangements when developing financial education content, and to implement, monitor, evaluate and report on consumer financial education activities.
The Authority said it will consult with the Financial Sector Transformation Counsel on the draft conduct standard before it is published for public comment.
Joint standard: culture and governance
The FSCA and the Prudential Authority (PA) are developing “a high-level” joint standard relating to culture and governance, which is envisaged to be published for public consultation next year.
Joint standard: information technology governance and risk management
The FSCA and PA are refining the joint standard following the public consultation process. It is expected that the joint standard will be submitted to National Treasury by the end of this year or the beginning of 2023.
Joint standard: cyber security and cyber resilience requirements
The draft joint standard was published for public comment in December 2021. The joint standard has been refined, and it is envisaged that a second version of the draft joint standard will be published for public consultation “in due course”.
Other IT-related standards
The FSCA and PA are busy with technical work focused on other IT-related topics, such as cloud computing and the outsourcing of IT functions. The outcome of the technical work might translate into legislative proposals that will be consulted on during the next three years.
Development of cross-sector licensing forms
In an attempt to ensure a consistent approach to licensing across the sector, and also in anticipation of the licensing framework to be given effect to under the Conduct of Financial Institutions Bill, the FSCA will develop cross-sector licensing forms. It is expected that these forms will be finalised next year.
Beneficial owners of financial institutions
Following recommendations relating to beneficial ownership by the Financial Action Task Force, the FSCA said it is considering how best to address the recommendations relating to the beneficial owners of financial institutions through policy and legislative interventions. The proposed interventions will be consulted on when they are ready.
Conduct standard: lost accounts and unclaimed assets
The FSCA said the treatment of lost accounts and unclaimed assets within the financial sector “remains a significant concern”. In the retirement sector alone, unclaimed assets stood at R47.3 billion in 2021.
To mitigate risks relating to lost accounts and unclaimed assets more effectively, the FSCA will develop policy proposals surrounding the treatment of lost accounts and unclaimed assets, with the goal of proposing legislative interventions through a conduct standard.
The policy work will take place this year and in 2023. Formal draft legislative proposals are only expected to be published during the first quarter of 2024 and finalised during mid-2025.
Conduct standard: open finance
Open finance is a framework to allow consumers and enterprises to access and share their financial data with third-party providers who can use that data to develop products and services with consent.
Following the FSCA’s consultation and research paper titled “Regulating open finance”, published in 2020, the Authority is continuing with technical work aimed at formulating policy proposals on open finance. It is envisaged that further discussion and/or position papers will be published, with the goal of proposing legislative interventions through a conduct standard.
Policy work will continue in 2022 and 2023, and it is likely that a draft conduct standard will only be published for public comment during the first half of 2024.
