Secondary

More Effective Regulation Envisaged

National Treasury publishes a revised draft of the Financial Sector Regulation (FSR) Bill for public comment. The revised Bill takes into account comments received on the first draft, published in December 2013, as well as input from stakeholder engagements with members of the public and various government departments.

It also released a discussion document “Treating Customers Fairly in the Financial Sector: A Market Conduct Policy Framework for South Africa” which is the first attempt to develop a comprehensive framework for how the market conduct regulator will operate, in order to ensure that financial institutions treat their customers fairly.

Second draft of the Financial Sector Regulation Bill

The Financial Sector Regulation Bill gives effect to the government decision in 2011 to shift to a Twin Peaks model of financial sector regulation for South Africa.

Key changes have been made to the second draft Bill in order to:

  • Improve its legal enforceability. In particular many definitions have been reconsidered and additional areas have been added to improve legal application;
  • Provide both authorities with powers in addition to the existing institution-specific laws so they are able to supervise and enforce financial sector laws and regulations in pursuit of their objectives;
  • Empower both authorities to issue standards for financial institutions to follow;
  • Clarify the role of other financial sector regulators under Twin Peaks. The role of the National Credit Regulator (NCR) was not explicitly explained in the first draft. Numerous stakeholders noted that as a key player, their role should be clarified. This has been done through explicit coordination and cooperation requirements;
  • Better align the governance arrangements for the new regulatory agencies, including clarifying the institutional form of the Prudential Authority, which will operate within the Reserve Bank;
  • Align the Reserve Bank powers for systemic oversight with its mandate for financial stability, provide greater clarity about these powers and how they may be used to fulfil this mandate;
  • Introduce a legal framework for regulating and supervising financial groups, from both a prudential and a conduct perspective; and
  • Strengthen the Ombuds system by creating a stronger central coordinating role for the Financial Services Ombuds Council.

The revised third version of the Bill is expected to be published for tabling in Parliament before the end of June 2015.

Market Conduct Policy Framework

A discussion document titled: “Treating Customers Fairly in the Financial Sector: A Market Conduct Policy Framework for South Africa” proposes a comprehensive framework for how the market conduct regulator will operate, in order to ensure that financial institutions treat their customers fairly.

The market conduct policy framework forms part of the Twin Peaks reform process, proposing a regulatory and supervisory framework for the new Financial Sector Conduct Authority (FSCA).

To better protect customers, the financial sector must be held to higher standards than generic consumer protection, and standards must be applied consistently across the sector.

As proposed in the policy documents, the various pieces of market conduct legislation applicable to the financial sector will be consolidated. The law will also empower the FSCA to supervise institutions more intensively, and take strict corrective actions against financial institutions based on the breach of principles in addition to monitoring compliance with rules.

The market conduct framework document also sets out proposals to support improved market conduct by better empowering financial customers. This includes improving the ombuds system so customers can easily and effectively lodge disputes against financial institutions, and refining financial education initiatives.

Public workshops will be held as follows:

  • Wednesday, 28 January 2015 – Johannesburg
  • Friday, 30 January 2015 – Pretoria
  • First week of February (tbc) – Cape Town

Interested parties should please contact linda.vanzyl@treasury.gov.za directly to register for the workshops.

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