The Financial Sector Conduct Authority last week published its 2025 Regulation Plan, setting out its regulatory framework priorities for the period 1 April 2025 to 31 March 2028.
The FSCA reviews and revises its three-year Regulation Plan annually, to ensure it remains up to date, effective, and continues to align to the Authority’s broader strategic objectives, also considering emerging risks and developments.
The finalisation and implementation of the Conduct of Financial Institutions (COFI) Bill and a review of the Financial Markets Act (FMA) will result in significant legislative and regulatory changes, the Authority says.
“A key focus for the next three years will be to support National Treasury in finalising these primary law reforms and transforming the subordinate legislative framework to ensure a seamless transition.”
The Regulation Plan also notes: “The volume of legislative changes and the impact that such continuous legislative reform has on industry, both from a planning and cost perspective, remains an important consideration for the FSCA. The current regulatory workplan is already extensive and will continue to introduce substantial legislative interventions throughout the next couple of years. As a result, the 2025 Regulation Plan attempts to limit, as far as possible, the introduction of new regulatory projects with the intention of managing the potential impact on industry.”
The FSCA has added four projects to the 2025 Regulation Plan.
Two of those projects, which relate to the reporting requirements for over-the-counter derivatives and the regulatory framework for credit ratings services, are explained further on in this article.
The other two new projects are:
- Requirements relating to the liquidation of retirement funds. This project seeks to update and consolidate the outdated liquidation requirements for retirement funds, aligning them with recent amendments to the Pension Funds Act.
- Conduct Standard – Requirements for payment services providers. This project establishes a new conduct framework for payment services, developed in co-ordination with the South African Reserve Bank’s National Payment System Department, to effectively regulate payment services activities.
The FSCA has not earmarked any FAIS- or insurance-specific interventions over the next three years. However, any matters related to FAIS or insurance will be considered as part of the process to transition the existing sectoral laws into the COFI Bill framework.
The Authority says although the Regulation Plan contains a significant number of legislative interventions, the intention is that legislative changes will start to reduce substantially following the finalisation of the COFI Bill transition project.
“At that stage, the regulatory framework would have matured and will reflect an outcomes- and principles-based approach, which allows for much more flexibility and negates the need for constant legislative change.”
The 2025 Regulation Plan outlines regulatory interventions and reforms across three broad categories:
- Market conduct, which primarily entails developments related to COFI.
- Financial market efficiency and integrity.
- Cross-cutting/sector-wide developments.
1. Transition to COFI
The first focus area is strengthening the market conduct regulatory framework across the financial sector. This includes the development and implementation of conduct standards that promote fair treatment of financial customers. A key priority under this area is supporting the finalisation of the COFI Bill and developing themed frameworks to operationalise the Bill.
The development of a holistic, cross-sector, robust, and customer-focused regulatory framework under the COFI Bill remains a top priority for the FSCA. Currently, the focus is on Phase 2 of the COFI Bill transition work, which entails the development of a broad set of themed frameworks.
The Authority envisages informal consultations on a variety of themed frameworks during 2025/26. The FSCA is in the process of refining its planning for this project, which entails setting out clear timelines for the implementation of the themed frameworks.
If there are delays in finalising the COFI Bill, the FSCA is likely to start introducing the themed frameworks in stages. Staggering will be informed by the prioritisation approach, which means the Fit and Proper and Risk Management and Internal Controls themed frameworks will likely be progressed first.
2. FMA review and other financial market interventions
The second focus area is strengthening financial market efficiency and integrity. A key initiative under this area includes assisting National Treasury in reviewing the FMA and, at the same time, enhancing market efficiency and integrity through various regulatory interventions.
The aim is to modernise and clarify the FSCA’s rule-making mandate – once the FMA is amended, all subordinate regulatory projects will be realigned to reflect any new or expanded powers and responsibilities.
During 2025/26, the FSCA may engage on a draft Bill published for comment, providing detailed inputs throughout the consultation process.
As mentioned earlier, the Authority has added two financial market projects to the 2025 Plan. These are:
- OTC derivatives reporting standard
With Strate Ltd licensed as South Africa’s first trade repository in November 2024, work is under way to operationalise FMA Conduct Standard 3 of 2018. Amendments will update data fields, formats, and descriptions to align with current global best practice, introduce drafting clarifications, and set an effective date once the repository is fully functional.
- Credit ratings agencies
Upon the repeal of the Credit Ratings Services Act by the COFI Bill, the FSCA will consolidate and streamline the existing notices into a new Conduct Standard. Technical work begins in 2025/26, with a draft standard due for public consultation in 2026/27.
The following projects have been carried forward into the 2025 Plan:
Central clearing framework
A draft Joint Standard on the exemption criteria for foreign central counterparties and trade repositories has been tabled in Parliament; finalisation is targeted in 2025/26, in parallel with the completion of the equivalence framework and licensing rules. Technical work on the eligibility criteria for participants in central clearing is under way, with a discussion document slated for public consultation in 2025/26.
Capital and risk management for non-bank ODPs
A Joint Standard to strengthen capital and risk requirements for over-the-counter derivative providers (excluding banks) will be published via a discussion document in 2025/26.
Benchmarks framework
In response to May 2025 amendments of the European Union’s Benchmark Regulations, the FSCA will narrow its draft Conduct Standard to “significant” and “critical” benchmarks only; refine quantitative thresholds to suit local markets; develop clear criteria (both quantitative and qualitative) for licensing determinations; impose user-reporting obligations; and create technical guidance on threshold calculations. Parallel work will develop an equivalence and recognition regime for approved foreign benchmarks.
Market-infrastructures standards
- Conduct Standard for market infrastructures. A second draft with extended scope has been consulted on. A third public consultation is planned for 2025/26, after which the standard may be submitted to Parliament.
- Joint Standard on recovery plans. Following consultation in 2024/25 and necessary amendments, the draft will be forwarded to National Treasury for tabling in Parliament in 2025/26.
Short-selling and securities financing
- Short-sale reporting: Public comments on the second draft Conduct Standard will be finalised, and the next steps (including possible submission to National Treasury) are contingent on stakeholder feedback.
- Securities financing transactions: A draft Conduct Standard has been prepared and is due for public consultation in 2025/26.
Cross-cutting/sector regulatory framework
The third focus area is on cross-cutting/sector-wide developments that address a broad range of themes and systemic issues affecting the financial sector. These include open finance, artificial intelligence, sustainable finance, and operational resilience.
The following cross-cutting/sector regulatory framework projects listed in the 2024 Regulation Plan remain relevant:
3. Cross-sector licensing requirements.
The development of cross-sector licensing requirements in anticipation of the COFI Bill is continuing. The timelines surrounding public consultation on these draft requirements remains uncertain.
Joint Standard – Requirements relating to third-party service provision (outsourcing).
Technical work in respect of this Joint Standard, which is focused on harmonising and strengthen requirements pertaining to third party service provision/outsourcing, is expected to continue throughout 2025/26, and a version for public consultation will likely only be ready in 2026/27.
Joint Standard – Culture and Governance. The Authorities plan to publish the draft Joint Standard for public consultation in 2025/26.
Conduct Standard regarding industry practices and treatment of lost accounts and unclaimed assets. The FSCA envisages that a draft Conduct Standard will be published for public consultation during 2025/26.
Joint Standard – Requirements relating to beneficial owners. The Authorities aim to publish the draft Joint Standard for public consultation during 2025/26.
Artificial intelligence
Over the past year, the FSCA and the PA have been conducting a market study on the adoption and usage of AI in the financial sector.
The market study focuses on how AI technologies affect consumer protection, influence market conduct, and impact financial stability.
“The research will provide valuable insights that ensure that AI is leveraged ethically, responsibly, and effectively to benefit all stakeholders, while safeguarding the integrity and soundness of the financial sector,” the FSCA says.
The Authorities are likely to include high-level governance principles relating to the use of AI by financial institutions into the Joint Standard – Governance requirements for financial institutions.
In addition, the FSCA is considering the extent to which existing frameworks that are outcomes- and principles-based can be leveraged to explain how these should be applied in an AI context, potentially through Guidance Notices.
Operational risk and resilience and cloud computing
The FSCA and the PA are assessing the extent to which the regulatory framework requires strengthening to ensure that:
- financial institutions manage operational risk and resilience effectively and consistently; and
- the regulatory framework appropriately deals with the emerging risk of cloud computing.
The Authorities are likely to formulate draft Joint Standards for public consultation. The timing is still under consideration.
Prudential regulation transition plan
The third focus area also includes developing a plan to guide the transition of prudential regulation of retirement funds, collective investment schemes, and friendly societies to the PA on 31 March 2026.
The FSCA says the planning for the transition – which is likely to occur in stages – is progressing well.
The process could entail:
- transitioning certain prudentially focused frameworks currently supervised by the FSCA to the PA;
- converting certain frameworks currently supervised by the FSCA to Joint Standards; and
- developing new prudentially focused frameworks.
The implementation of the framework changes will likely entail a multi-year process, with contingency plans in place to address immediate priorities.
Regarding medical schemes, discussions between the FSCA, PA, Council for Medical Schemes, National Treasury, and the Department of Health are ongoing, and formal proposals surrounding the future regulation of medical schemes will be developed in due course.
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