The Future of Market Conduct: Fais Update Presentation for:

FAIS Conference

March 2017

Caroline Da Silva

DEO :FAIS and Consumer

Education

• Where are we now? An update on Twin Peaks

• Strategy of FSCA – focus for the first three years :

• Building a new organisation • A robust regulatory framework • An inclusive and transformed financial sector • A culture of fair customer treatment • Fair and sustainable advice and distribution models • Understanding new ways of doing business and

disruptive technologies

AGENDA

TWIN PEAKS

Consumer Education

Market Integrity

Conduct of Business Banking

Insurance

Financial Conglomerates

Financial Stability Oversight Committee

Financial Market Infrastructure

Resolution Authority

MARKET CONDUCT PRUDENTIAL FINANCIAL STABILITY

FSCA SARB PA

REGULATORY PARADIGM SHIFT

Backward-looking

Compliance-based

“One-size-fits-all”

“Silo” approach

Forward-looking

Pre-emptive and proactive

Outcomes-based

Risk-based and

proportionate

Comprehensive and

consistent

Intensive and intrusive… National Treasury, February 2011

“A safer financial sector to serve South Africa better”

FSB FSCA

Jurisdiction Non-banking financial sector

All financial institutions

Focus Combined prudential and market conduct regulator

Dedicated market conduct regulator

Founding legislation

Financial Services Board Act

Financial Sector Regulation Act

Legislation overseen

A range of sector-specific laws

Existing sector-specific laws to be replaced by an overarching, cross-cutting Conduct of Financial Institutions Act

STRATEGY OF FSCA… BUILDING A NEW ORGANISATION

Governance structure

Overseen by a Board appointed by the Minister with governance sub-committees

Overseen by an Executive Committee comprising the FSCA Commissioner and Deputy Commissioners appointed by Minister of Finance, with governance sub-committees appointed by National Treasury

Regulatory decision-makers

Executive Officer and (through delegation) Deputy Executive Officers, appointed by the Minister-

Regulatory authority conferred on Commissioner by the FSRA, with certain functions to be performed by the Executive Committee as a collective

Organisation design

Sector-specific divisions focused on sector-specific laws.

Largely functional design, with cross-cutting licensing, enforcement and conduct of business supervision groups. Strengthened research and technical analysis capacity

STRATEGY OF FSCA… BUILDING A NEW ORGANISATION

• FSR Bill

• Consequential Amendments

• Conduct of Financial Institution Act

• Activity Based Licencing Model

STRATEGY OF FSCA… A ROBUST REGULATORY FRAMEWORK

Access barriers prevent a target market/clients from using

financial products and services. These barriers include:

affordability; physical proximity; appropriateness of

product/service features for the target market; eligibility

requirements imposed by financial service providers to

access the service; and regulatory requirements that

influence whether a person can access a product/service or

not. SOURCE: Cenfri, Finmark Trust and UNCDF, 2014, “The MAP Toolkits: Making Access Possible”

STRATEGY OF FSCA… INCLUSIVE AND TRANSFORMED SECTOR

INCLUSIVE AND TRANSFORMED SECTOR

PROMOTING ACCESS THROUGH AN ENABLING LEGAL AND REGULATORY FRAMEWORK

• Retail Banking Review

• Micro-insurance Framework

• Proposed Regulatory Framework for Funeral Service Providers

• FAIS Competency Framework

• Framework to enable appropriate product development and access to

distribution and advice in Savings and Investments

• Access to finance for SMEs through capital markets

• Enabling technological innovation in the provision of financial services

and products

• Ongoing review of sectoral laws in transitional period for proportionality

• Taking Regulation to the People

INCLUSIVE AND TRANSFORMED SECTOR

Usage barriers discourage a target market from using a product or service. These may include: Lack of trust in the service provider; perceptions of the affordability or value of the product / service; level of financial capability of the potential clients; and fear of formalities. SOURCE: Cenfri, Finmark Trust and UNCDF, 2014,

“The MAP Toolkits: Making Access Possible”

BUILDING TRUST AND CONFIDENCE IN THE SECTOR TO ENCOURAGE USE OF APPROPRIATE FINANCIAL SERVICES AND PRODUCTS

• FSCA Mandate

• Strengthening financial literacy through better

education

• Treating Customers Fairly (TCF)

• Dispute Resolution

• Unclaimed Benefits

• Transformation

INCLUSIVE AND TRANSFORMED SECTOR

Inclusive and Transformed Sector

• TCF- Embedding

• Governance and Culture

STRATEGY OF FSCA… A CULTURE OF FAIR CUSTOMER TREATMENT

• RDR

STRATEGY OF FSCA… FAIR ADVICE AND DISTRIBUTION

STRATEGY - FINTECH AND INNOVATION

Joint sensemaking & sensegiving in a rapidly evolving landscape – are our regulatory frameworks “sufficient” as these innovations emerge?

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