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Draft COFI Bill on Course

February 28, 2019

National Treasury

A revised Draft Conduct of Financial Institutions Bill will be submitted to cabinet for approval towards the end of 2019.

National treasury revealed this during a briefing at a recent public workshop on the bill.

The draft bill was published for comment in December 2018.

It is designed to provide for the setting up of a consolidated, comprehensive and consistent regulatory framework for the conduct of financial institutions.

The draft bill aims to:

• provide for the establishment of a consolidated, comprehensive and consistent regulatory framework for the conduct of financial institutions that will—
-protect financial customers, promote the fair treatment and protection of financial customers by financial institutions;
-support fair, transparent and efficient financial markets;
-promote innovation and the development of and investment in innovative technologies, processes and practices;
-promote trust and confidence in the financial sector;
-promote sustainable competition in the provision of financial products and financial services;
-promote financial inclusion;
-promote transformation of the financial sector; and
-assist the South African Reserve Bank in maintaining financial stability;
• provide for the application and supervision of requirements for the conduct of financial institutions;
• provide for the licensing of financial institutions and the authorisation of representatives;
• provide for requirements regarding culture and governance, and empower standards to be made regarding culture and governance;
• provide for requirements regarding financial products, and empower conduct standards to be made regarding financial products;
• provide for requirements regarding financial services, and empower conduct standards to be made regarding financial services;
• provide for requirements regarding promotion, marketing and disclosure, and empower conduct standards to be made regarding promotion, marketing and disclosure;
• provide for requirements regarding distribution, advice and discretionary investment management, and empower conduct standards to be made regarding distribution, advice and discretionary investment management;
• provide for requirements regarding post-sale barriers and obligations, and empower conduct standards to be made regarding post-sale barriers and obligations;
• provide for requirements regarding safeguarding assets and operational requirements, and empower conduct standards to be made regarding safeguarding assets and operational requirements;
• provide for requirements regarding reporting, and to empower conduct standards to be made regarding reporting;
• provide for remedial actions for financial customers; and
• provide for matters connected therewith.

Comment on the draft bill is invited until 1 April 2019.

According to the briefing, the draft bill is designed to be activity-based, principles and outcomes focused, risk-based and proportionate and supportive of transformation, inclusion and competition and innovation.

Particular areas for further consultation include scope of application, licensing approach, financial market activities, pension fund regulation and investment fund regulation.

Treasury also pointed out that the Financial Markets Act is under review.

Meanwhile, treasury has announced that it will host, in conjunction with the Financial Sector Conduct Authority, a media workshop on the bill on 6 March 2019 in Pretoria.

The workshop is designed to “help journalists better understand what the Bill aims to achieve in the regulation of the financial services sector”.

In a separate matter, the national assembly has passed the Customs and Excise Amendment Bill and the Public Investment Corporation Amendment Bill and sent them to the national council of provinces for concurrence.

The Customs and Excise Amendment Bill was tabled in parliament at the beginning of February 2019.

The bill aims to amend the Customs and Excise Act of 1964 so as to:

• make provision for the administration and collection of carbon tax revenues; and
• provide for matters connected therewith.

The bill’s explanatory summary had referred to the intention to insert a new provision for the purpose of the administration of allowances and limitation of allowances in relation to the Carbon Tax Bill; require that a taxpayer as defined in the Carbon Tax Bill license premises as may be prescribed by rule; regulate actions pertaining to submission and verification of accounts, collection and payment of the carbon tax and allow the Commissioner to make rules insofar as it is necessary to regulate duties, powers and rights not regulated by the Carbon Tax Bill in relation to collection and payment of the carbon tax.

The Public Investment Corporation Amendment Bill was tabled on 15 February 2019.

The committee bill aims to amend the Public Investment Corporation Act of 2004, so as to:

• insert certain definitions;
• determine the composition of the corporation’s board of directors and to provide for the progressive implementation of the new composition;
• provide for the Minister to designate the Deputy Minister of Finance or any Deputy Minister in the economic cluster, in consultation with Cabinet, to be the chairperson of the board;
• provide for the Minister to appoint the members of the board in consultation with Cabinet;
• provide for specific representation on the board;
• require directives regarding the management of the corporation to be tabled in the National Assembly and before the depositors, as well as that it must be published;
• require the corporation to consider certain guidelines when investing deposits;
• require the corporation to publish and submit a report on all investments to the Minister for tabling;
• provide for annual reporting on requests for approval made in terms of legislation;
• provide for a procedure that the Minister must follow before making regulations;
• provide that the Minister must table regulations in the National Assembly; and
• provide for matters connected therewith.

During deliberations on the bill, the standing committee on finance decided to reject the private member’s bill on the PIC drawn up by the Democratic Alliance’s David Maynier.

The select committee on finance will process the Customs and Excise Amendment Bill and the Public Investment Corporation Amendment Bill.