Page 86 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 5 Legislation and guidelines

Hot Tips
The definition of advice under FAIS is deliberately broad in order to be as inclusive as
possible. Does this mean that the exchanging of share tips on the golf course between
friends is regulated by FAIS?
The answer, as a rule, is no. The FAIS definitions involve advice to a client given as part of the regular
business of the FSP. Loose talk between mates is therefore not at issue. But a financial adviser playing
golf with his clients needs to be careful: investment tips given at the 19th hole would be subject to
FAIS rules.
Revised legislation will provide for financial institutions to be authorised separately for each
activity. Institutions that carry out multiple activities – as many financial institutions do – will still
obtain a single FSCA licence, but with multiple activity authorisations.
The framework for licensing will be established under the FSR Act although some licences will
be issued under the COFI legislation. This will allow authorities to better control licensing across all
aspects of the evolving twin peaks legislative and regulatory framework. A new license category of
corporate advisery services has also been added under the second draft of the COFI Bill.
The changes in the second draft of the COFI Bill include:
R How COFI will be applied in relation to existing legislation
R The approach to conduct standards
R A redesigned approach to licensing
R More detail around transformation (BEE and EE) and enforcement
R The removal of medical schemes for the meantime
R Streamlining of the interaction between the Financial Markets Act and COFI
R Application of COFI to non-retail business (eg, where clients are corporates or where clients
are professional investors)
A key objective of the COFI Bill is to give legislative muscle to the TCF principles (see page 99),
which are not currently enforceable. COFI will, amongst other things, ensure that the TCF principles
are legally binding.
The key themes of the COFI Bill can be summarised as follows:
Activity-based
Under COFI, the licensing regime will focus on the defined activities that a prospective licensee
wishes to perform, not on defined sectors. This is a change from existing regulations, which tend to
apply rules according to a classification of institutions rather than activities.
Conduct standards
The first draft of the COFI Bill contained enabling provisions for making conduct standards in
different chapters. These were removed in the second draft and the standard-making provisions
in the FSR Act have instead been strengthened. The FSCA has thus empowered, through the
conduct-standard making provisions in the FSR Act, to set conduct standards.
The first conduct standards have already been published and the Conduct Standard for Banks,
released by the FSCA on 3 July 2020, is seen as a precursor of the conduct-related principles that
will be contained in the COFI Bill.
There are two conduct standards for collective investments – one relating to the NAV calculation
and pricing of CIS portfolios and one relating to the delegation of administrative functions.
The FSCA has also published a draft conduct standard on the requirements for collective
investment scheme managers.
The standard sets out:
R requirements relating to governance and control, including risk management, compliance and
internal auditing for managers;

84 Profile’s Unit Trusts & Collective Investments September 2025