Page 87 - Profile's Unit Trusts & Collective Investments - March 2025

Legislation and Guidelines

Changes to FAIS
Since it first came into effect in 2002, the FAIS Act has been amended a number of times.
The most noteworthy changes have been:
• The scrapping of the advisery committee on financial service providers (a committee of industry
representatives) in order to “further enhance the independence and impartiality of the Registrar” in
2014
• Provision for “publication of administrative actions and notification of official acts on the FSCA
website” instead of in a Government Gazette in 2014
• A new section (8A) which made continuous professional development (CPD) a specific Fit and
Proper requirement in 2014
• An increase of the maximum penalty from R1 million to R10 million (or a maximum 10-year prison
sentence)
• Revised Fit and Proper requirements published in December 2017 (BN194)
• Amendments to the General Code of Conduct for FSPs (June 2020 and December 2022)
• Amendments to the determination of Fit and Proper (June 2020)
• The FSR Act established the Ombud Council to assist in ensuring that financial services consumers
have access to affordable, effective, independent and fair dispute resolution processes for
complaints about financial products and services. In July 2024 the “Rules on Proceedings of the
Office of the Ombud for Financial Services Providers” made under the FAIS Act in 2003 were revoked
and the Ombud Council replaced these with its rules for the FAIS Ombud. The main change to the
rules was an increase of the maximum compensation the FAIS Ombud may award for financial
prejudice or damages from the previous maximum of R800 000 to R3.5 million.

Principles-based
The draft legislation specifies standards related to the intention of the regulation rather than
lists of compliance rules. The intention is to enable the regulator to focus on the spirit rather than
the letter of the law (ie, to monitor and enforce outcomes rather than procedures).
Outcomes-focused
The outcomes-based method to be implemented under COFI will mean that FSPs will not just
be measured on rules and compliance, but also on their ability to achieve good client outcomes.
This will include methods of assessing whether costs and charges are fair and justifiable.
Risk-based and proportionate
The COFI bill pursues a risk-based approach to monitoring outcomes which will enable the
regulator to identify areas of greatest risk and address such risks in a proportional manner. The
objective is to create a fairer environment for institutions of differing sizes and encourage new
entrants into the market by reducing barriers to entry.
Transformation
The COFI bill explicitly supports transformation, making the FSCA responsible for supporting
black-owned businesses that wish to provide financial products and services. The provisions of the
bill also strengthen protection of vulnerable consumers.
Under the second draft of the COFI bill, an institution’s transformation policies need to specify
tangible targets. The second draft also allows the FSCA to use its enforcement powers in relation
to an institution’s governance and transformation frameworks.

The Financial advisery and Intermediary Services (FAIS) Act
Legislation to protect investors from bad investment advisers was first mooted in the early
1990s. Before the implementation of the Financial advisery and Intermediary Services (FAIS) Act,
only investment managers – people who actually invested money on behalf of their clients – had to
be registered with the FSCA, and gaps in legislation made it possible for virtually anybody to set up
shop as an adviser and begin giving advice. Due to the absence of a coherent body of law, recourse
in the event of disastrous advice often had to be made in terms of common law, which proved
costly and ineffective.

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