Page 83 - Profile's Unit Trusts & Collective Investments - March 2026

Legislation and guidelines Chapter 5

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.
The Conduct of Financial Institutions (COFI) Bill
The Conduct of Financial Institutions (COFI) Bill will reform of the regulation of market conduct
in South Africa. The Bill is intended to consolidate and modernise conduct regulation across the
financial sector and to replace large portions of existing sector specific legislation, including the
FAIS Act.
The COFI Bill has been published in draft form for comment in 2018 and again in 2020. A revised
bill has been sent to cabinet and is expected to be tabled in 2026.
Key features of the COFI framework include:
R A shift from institution based regulation to activity based regulation, where licensing and
conduct requirements are linked to the specific activities performed by a financial institution.
R An outcomes focused approach that prioritises fair customer outcomes over prescriptive
compliance.
R The formal incorporation of treating customers fairly (TCF) principles into enforceable law.
R Enhanced regulatory tools for supervision, enforcement, and transformation.
Under COFI, the FAIS Act is expected to be repealed in phases, with existing licensing requirements
and regulation of conduct being incorporated in the COFI Act or conduct standards issued under it.
CISCA is expected to remain in force but to be amended to align with COFI’s principles based and
outcomes focused approach.
The licensing function under COFI will be a significant shift from the current system. Financial
institutions in SA are granted licences on an institutional basis, an approach that is too broad to
effectively regulate conduct across disparate activities.
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.
A key objective of the COFI Bill is to give legislative muscle to the TCF principles (see page 88),
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 Financial Sector Regulation Act empowers the FSCA to issue conduct standards that are
legally binding on financial institutions.
These standards are expected to play a central role in regulating collective investment schemes
and are increasingly used in preference to detailed legislative amendments.
The conduct standards have binding legal effect and increasingly serve as the primary mechanism
through which market conduct regulation is implemented.

Profile’s Unit Trusts & Collective Investments March 2026 81