Customer protection bill gets new draft
The Treasury has published the second draft of a bill to govern the conduct of financial institutions for public comment. The Conduct of Financial Institutions Bill will ensure that the principles of treating customers fairly are legally binding and enforced on all financial institutions.
The Treasury has published for public comment the second draft of a bill to govern the conduct of financial institutions.
The Conduct of Financial Institutions Bill will ensure that the principles of treating customers fairly are legally binding and enforced on all financial institutions. These principles are not enforceable now.
The Treasury said in a statement on Tuesday that there had been some improvement in the treatment of customers, but this was not consistent across the sector.
The bill provides for the Financial Sector Conduct Authority (FSCA) to set conduct standards for the sector.
The latest draft of the bill takes into account public comments on the first draft, published in December 2018. It will be reviewed in the light of the second round of public comments and then submitted to the cabinet for approval and tabling in parliament early next year.
Also published is a response document which explains key changes made to the first draft of the bill, in response to public comments.
IT SETS REQUIREMENTS FOR FINANCIAL INSTITUTIONS TO MEET AND OUTCOMES TO DELIVER
The Conduct of Financial Institutions Bill is a key pillar in government s twin peaks finan
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cial sector regulatory reform process that aims to entrench better financial customer outcomes in the SA financial sector.
It sets requirements for financial institutions to meet and outcomes to deliver,” the Treasury said in a media statement.
Many of the changes in the bill are technical and relate to its relationship with other legislation governing the financial services sector for example with respect to licensing.
The revised draft of the bill also attempts to strengthen the transformation in the financial sector.
The Treasury said: The “requirements for financial institutions to have transformation policies are refined to require the policies to more closely align to the achievement of tangible targets. The revised draft also allows for the FSCA to issue directives in relation to transformation policies and clarifies that the FSCA may use its supervisory and enforcement powers to ensure that a financial institution s governance frameworks
including in relation to transformation are adequate and — adhered to.”
The revised draft of the bill removes all reference to medical schemes and medical scheme administrators pending finalisation of the work of a task team consisting of the Treasury, the Council of Medical Schemes, the Prudential Authority and the Financial Sector Conducted Authority on the regulatory approach of the three regulators.
This follows objections by the medical schemes regulator that the draft bill would render it a lame duck in its regulation of medical schemes.
The revised bill also includes a new licence regime for corporate advisory services such as investment banks, the arrangement of debt and equity issues, advisory services for example in relation to mergers and acquisitions, and on- and off-balance sheet financing of transactions.
A new license activity (called lending ”) has been added to capture the provision of nonretail credit that is, lending — agreements that are not regulated in terms of the National Credit Act. The deadline for comments is October 30.