The Importance of the Conduct of Financial Institutions (COFI) Bill

 

By Bruce Cameron
Co-author to The Ultimate Guide to Retirement in South Africa

 

Vulnerable consumers (including pensioners) require protection. Why new legislation is essential to protect consumers

 

Legislation urgently required to protect financial services customers

The vital Conduct of Financial Institutions (CoFI) Bill has been a long time coming with repeated promises of making it law.

It was first was provided for public comment in 2018. Since then it has been checked and rechecked by the financial sector industry and National Treasury. The latest word from National Treasury is that CoFI will come before Parliament in the second half of this year.

CoFI is a desperately needed piece of legislation to bring the misbehaving financial sector to heel, particularly in they treat their customers. And this is made worse how they virtually ignore customers with vulnerabilities.

A recent ruling against Discovery Insure by the Escalation Board of the National Finance Ombud Scheme found that a complainant, who was unable to get an acceptable response from Discovery and followed up the complaint with attempts at intimidation by Discovery, found:

1. ‘The complainant suffered material inconvenience or distress when he was using the participant’s communication channels in acquiring the policy documents.

2. ‘The NFO, being an alternative dispute resolution forum for financial disputes which fall within its jurisdiction, ‘does not have the power to dictate to participants how to conduct their business or, what processes to implement. This falls within the powers of the market conduct regulator, being the Financial Sector Conduct Authority (FSCA)’.

3. Although compensation was agreed the NFO was ‘however, playing a role in encouraging the participant to re-evaluate its processes when designing its communication channels, especially taking into consideration the needs of vulnerable consumers.’

So, in other words, if financial institutions make it difficult to correspond with them, particularly in the case of vulnerable consumers, but there is nothing the ombuds can do to change processes of the institution, but it can still level orders for compensation for complainants.

The FSCA also does not adjudicate on individual disputes between customers and financial institutions but is responsible for overseeing the overall conduct of financial institutions and markets. It does so by setting requirements for how financial institutions should treat their customers and by checking whether the overall policies, procedures and governance arrangements within these businesses are designed to ensure consistent delivery of fair outcomes for all financial customers, including the most vulnerable.

 

Why CoFI is important

This is where CoFI Bill becomes important for consumers. It will allow the FSCA to improve the way financial institutions treat their customers by fully implementing the six outcomes of Treating Customers Fairly (TCF) (See below). In terms of the six outcomes, financial institutions must treat you fairly.

CoFI is a very solid part of the twin peaks legislation, which separates the prudential requirements (ensuring your financial institution does not go bankrupt), which falls under the South African Reserve Bank; and, the conduct of financial institutions in how you as a customer are treated by the institution. The marketing side falls under FSCA.

Once the legislation is finally submitted to Parliament and signed by the President, the conduct regulator, FSCA, will also need to publish new conduct standards to support the CoFI Act. These will elaborate on the broad principles of treating customers fairly which is contained in the Bill. The point is intension to help reduce the exploitation of consumers, particularly the vulnerable. The vulnerable includes people of retirement age, who suffer from increasing health problems.

The Bill affects all parts of the financial services industry including banking, insurance and investment. The only excluded financial sector is medical aid, which falls under the Council for Medical Schemes, which is not subject to the FSCA.

National Treasury says the CoFI Bill was submitted to the Office of the Chief State Law Adviser in December 2024 for a preliminary opinion to obtain Cabinet’s approval to introduce the Bill in Parliament.

National Treasury received the requested opinion in the first week of May 2025. National Treasury is hoping to obtain Cabinet’s approval during the 2nd quarter of 2025.

Treasury says the CoFI Bill ‘represents a complete overhaul of the regulatory framework pertaining to the conduct of financial institutions and is accordingly quite complex and lengthy and has had to go through a number of reviews by the regulators and the Office of the State Law Adviser. This Bill repeals and replaces seven existing financial sector laws and further amends numerous legislation, resulting in one Bill plus 19 Amendment Bills.

‘The bill will streamline and harmonise the legal landscape that financial institutions operate within and provide a single, holistic legal framework for market conduct regulation in South Africa that is consistently applied to all financial institutions.’

The FSCA is preparing for the Bill’s implementation FSCA has already started informal engagements on some of the regulatory frameworks it intends to make once the bill is passed, and these will continue over the next few years.

The big question is why product providers of the financial service sector continue to resist change in the interests of their customers.

 

The Six TCF outcomes

Treating Customers Fairly is based on six outcomes. They are:

• Customers can be confident they are dealing with firms where TCF is central to the corporate culture

• Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly

• Customers are provided with clear information and kept appropriately informed before, during and after point of sale

• Where advice is given, it is suitable and takes account of customer circumstances

• Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect

• Customers do not face unreasonable post-sale barriers imposed by firms to change products, switch providers, submit claims or make complaints.

There is a lot more detail about why a will is necessary in the book, The Ultimate Guide to Retirement in South Africa, co-authored by Bruce Cameron & Wouter Fourie. For more information on how to purchase the book go to BUY NOW on our website www.retirementplanning .co.za

 

Read more on this topic here:

https://retirementplanning.co.za/col-13-name-and-check-your-beneficiaries/

https://ascor.co.za/how-to-draft-a-will/

https://ascor.co.za/you-need-an-estate-plan-to-protect-the-future-of-your-loved-ones/

https://ascor.co.za/things-to-have-handy-in-case-you-pass-away/

https://ascor.co.za/death-and-taxes-make-both-more-palatable-with-an-estate-plan/

https://ascor.co.za/drafting-a-last-will-and-testament/