Pending regulations flowing from the Retail Distribution Review (RDR) will not be processed in their current form but will be incorporated into new regulations that will developed under the Conduct of Financial Institutions (Cofi) Bill.
This emerged from the FSCA’s “Regulation Plan: 1 April 2022 to 31 March 2025”, which was released last week. To download the plan, go to www.fsca.co.za, click on “Regulatory framework” and go to “FSCA Regulation Plan”.
The plan outlines the FSCA’s priorities for regulating the financial sector over the next three years. As expected, a significant focus will be on transitioning into a regulatory framework that dovetails with the aims and principles of the Cofi Bill.
Addressing RDR specifically, the FSCA said the proposals that were scheduled to be incorporated into pending regulatory instruments included:
- In the insurance context, allowing for the payment of advice fees separately from commission;
- Remuneration for policy data administration services and determining the maximum allowable fees for such services;
- Principles and reporting requirements related to “equivalence of reward”;
- Incorporating the remuneration dispensation for savings and investment products for the low-income market; and
- Enhancements to the premium collection framework.
The FSCA said these RDR proposals will not continue as initially planned. The proposals will, however, be incorporated into the development of the new framework through the transition process and will be consulted on in due course.
It said the RDR proposals “remain a priority” and integrating them into the wider regulatory reform was “imperative for alignment and regulatory efficiency”.
Advisory and intermediary regulation
In the plan’s section outlining “high-priority conduct-focused developments”, the following regulatory changes are relevant for financial advisers and intermediaries:
Amendments to the General Code of Conduct and Compliance Officer Qualifications Notice
The “minor” draft amendments to these regulations have been submitted to Parliament, and it is expected that they will be finalised soon.
Amendments to the Fit and Proper Requirements
The “minor” draft amendments will not continue, and these amendments will be incorporated into the process of transitioning into the Cofi Bill framework.
Amendments to the FAIS Ombud rules
Following the World Bank Group recommendations contained in its “Financial Ombud System Diagnostic” that was published in July 2021, the FSCA will be proposing amendments to the FAIS Ombud rules, specifically to increase the ombud’s jurisdictional limit of R800 000. The FSCA said the current limit, which has not increased since 2004, is misaligned to the limits of other comparable ombuds.
Declaration of crypto assets as a financial product under the FAIS Act
The FSCA held off on its 2020 draft notice proposing to declare crypto assets as a financial product under the FAIS Act until further clarity was obtained on “broader developments” surrounding the regulation of crypto assets, including proposals to include crypto asset-related activities within the scope of the Cofi Bill.
In the meantime, the FSCA said it has initiated further work on understanding the crypto asset landscape, particularly in the advisory and intermediary environment.
As such, in April the FSCA issued a Request for Information to FSPs to identify the involvement of advisers and intermediaries in the crypto asset environment.
Read: FSPs given until the end of May to complete crypto assets survey
The outcome of the survey will be considered in conjunction with the broader developments surrounding crypto assets and will ultimately inform the FSCA’s decision whether it will proceed to make the declaration.
The Authority said the regulation of crypto assets “remains a high priority”, and it will “continue to monitor the environment and formulate policy responses as deemed appropriate”.
