What the COFI Bill means for you
National Treasury continues to drive the Conduct of Financial Institutions (COFI) Bill, which aims to entrench better customer outcomes in the financial sector. What does that mean for financial-services partners, and for consumers?
The COFI Bill – and it remains a bill, with the second draft distributed for public comment in September 2020 – forms part of the government’s Twin Peaks financial-sector regulatory reform process. As outlined by the National Treasury, the reform aims to consolidate the current conduct standards regulating financial institutions across a broad spectrum of acts into one piece of legislation.
“It is primarily applicable to financial institutions and seeks to establish and consolidate specific requirements which these institutions have to meet,” says Tracy-Lee Janse van Rensburg, a Director at Werksmans Attorneys. “Of particular relevance is the proposed implementation of the Treating Customers Fairly (TCF) principles within the bill, which will make such principles legally binding and enforceable across all financial institutions.”
“Consumers need to know that they are dealing with firms where TCF is central to the corporate culture,” says Bradley Du Chenne, CEO of comparison platform Hippo.co.za. “If consumers are treated unfairly, it erodes their trust in the financial services sector, and ultimately undermines the integrity of the entire system. With the COFI Bill, the National Treasury is hoping to ensure that South Africa’s financial sector continues to provide consumers and businesses with fair services and good value products that enable them to receive and make payments, and to save, borrow and insure themselves against daily risks.”
Under the proposed legislation, financial products and services marketed and sold in the retail market will have to be designed to meet the needs of identified customer groups and targeted accordingly. These principles are already entrenched in current legislation like the Policyholder Protection Rules in the Insurance industry. COFI will standardise the principles to apply to all customers in the financial sector. All customers will be provided with clear information and kept appropriately informed before, during and after the point of sale; and when advice is given, it will have to be suitable to the customer’s circumstances. Customers will also not face unreasonable post-sale barriers when they want to change products or switch providers.
“Hippo.co.za’s comparison platform is based on the idea that consumers can – and should – shop around for the best deals once they are in the market for insurance or other financial products,” says Du Chenne. “COFI focuses on putting the clients first”.
Janse van Rensburg adds that compliance with the provisions of COFI – particularly in terms of licensing, application of conduct standards, and treating of customers fairly – will become of paramount importance. “It will be necessary for financial service providers to ensure that their internal culture and governance practices are aligned with the TCF principles and that the institutions operate fairly and with integrity,” she says. Fortunately, the basics of integrity and fairness will come naturally to most of them.