Moonstone reported in March that the Financial Sector Conduct Authority has published the final version of a Conduct Standard that sets baseline requirements for financial institutions that provide consumer financial education.
Read: Finalised Conduct Standard for financial education released
Conduct Standard 1 of 2025 will come into effect on 26 March 2026.
The Conduct Standard aims to protect of financial customers by requiring that financial institutions that provide financial education initiatives take reasonable steps to ensure appropriate standards of behaviour, put in place governance and oversight arrangements when developing financial education content, as well as when implementing, monitoring, evaluating and reporting on consumer financial education activities.
Lize de la Harpe, senior legal adviser at Sanlam Corporate, has provided a commentary that unpacks the implications of the Conduct Standard.
The definitions of “financial education” and “financial education initiative” in the Standard set the scope of the activities covered, says De la Harpe.
“Financial education” means the process by which financial customers improve their understanding of financial products, product providers, financial services, service providers, and financial concepts and risks which aims to develop the skills and confidence to:
- become more aware of financial risks and opportunities;
- make informed financial decisions;
- manage their financial affairs more sustainably;
- know where to go for financial assistance and recourse; or
- take other effective actions to improve their financial well-being and the financial well-being of those under their responsibility.
A “financial education initiative” is defined as:
- any financial education programme, or other similar initiative or activity that is aimed at providing financial education, excluding any such initiative that is aimed at marketing or creating awareness surrounding a specific financial product or service, financial product provider or financial service provider, or
- a consumer education programme that forms the basis for a financial institution to claim any points for consumer education in terms of the codes of good practice on broad based black economic empowerment issued by the Department of Trade and Industry.
De la Harpe says the definition of “financial education initiative” contains two key concepts, both of which should be aimed at providing financial education: first, a “programme” that entails an officially organised system of financial education driven activities, and second, an “initiative”, which is a new plan or process to achieve something or solve a problem.
“To qualify as an initiative similar to a financial education programme, the initiative must entail some form of systematic planning/process aimed at providing financial education. This would, for example, include an awareness campaign but would exclude a once-off action like publishing an arbitrary article providing general information.”
The reference to “financial customers” is as defined in the Financial Sector Regulation Act and does not include other stakeholders, such as the board of a retirement fund and participating employers, she says.
Specific exclusions
De la Harpe says it is important to draw a distinction between general information and product/service provider and financial product specific information.
“The intention of this Conduct Standard is not to capture activities that are aimed at marketing or creating awareness surrounding a specific financial product/service provider or its specific products. The intention is also not to include arbitrary actions such as the publication of a once-off article providing consumer relevant information, even if such information is general in nature,” she says.
For example, any retirement fund-related communication providing information supporting the understanding of a particular retirement fund will not constitute a financial education initiative.
Similarly, a once-off or arbitrary publication (on a website or a news article) providing general consumer-relevant information will not constitute a financial education initiative. However, if, for example, a financial institution executes a planned series of publications aimed at promoting financial education in a systematic manner, that would constitute a financial education initiative.
Responding to the FSCA’s initial Discussion Paper, several commentators highlighted concerns as to what extent the Conduct Standard intends to cover communication by a retirement fund to its members regarding specific benefits, bearing in mind that a retirement fund benefit is a product under the Conduct of Financial Institutions Bill, says De la Harpe.
The FSCA, in its response document, confirmed that communication to members is not regarded as a “financial education initiative”, and it amended the definition in the final version to make this clear.
“Additional context was also added to the Statement of Need document to clarify the position regarding the types of activities the FSCA intends to be included within the scope of financial education initiatives and which not.”
Governance and reporting
The Conduct Standard requires financial institutions to have appropriate governance arrangements in place to oversee the design and implementation of financial education initiatives.
The financial institution will have to decide on what type of measures it will implement. The institution is expected to provide a rationale as to why the measures it has implemented are appropriate, taking into account the factors mentioned in the Conduct Standard.
“Financial institutions will also be required to report to the FSCA on its financial education initiatives in the manner and form as may be prescribed. When the detailed reporting obligations are developed, same will be published for public consultation, and stakeholders will be able to comment again at that stage,” says De la Harpe.
The FSCA has undertaken to align the reporting obligations with other reporting that is required to be submitted, to avoid duplication.
Marketing and branding
One of the main objectives of the Conduct Standard is to ensure that marketing is not done under the “guise” of financial education, says De la Harpe.
The FSCA feels strongly that there should be no branding in the content of the consumer education material. In fact, the Authority initially contemplated whether it should prohibit marketing done in conjunction with consumer education initiatives altogether.
“As a middle ground, the FSCA decided to allow some form of marketing as part of the initiative itself, but under the proviso that such marketing is not excessive and does not overwhelm the initiative. However, marketing of a financial institution’s specific financial products or services is not allowed,” she says.
Conclusion
The Conduct Standard does not compel a financial institution to undertake financial education initiatives. However, where a financial institution does undertake financial education, it must adhere to the requirements as prescribed in the Standard, says De la Harpe.
She says financial institutions should note that the requirements set out in the Conduct Standard are principles-based. “As such, they may be applied in a manner that is proportional to the nature, size, complexity, and risk profile of the financial institution concerned, as well as the nature and target group of the relevant financial education initiative.”
Disclaimer: The information in this article is a general guide and should not be used as a substitute for professional legal advice.
