The FSCA’s strategy sheds light on compliance focus areas
The Financial Sector Conduct Authority (FSCA) has its ‘five-year plan’ in the form of a 2021-2025 Regulatory Strategy that rounds-up some unsurprising plans, but still useful insight into what the FSCA will be focusing on this year – and beyond.
Having reviewed the document, here are some considerations to keep in mind:
The FSCA plans to reduce the cost of regulatory compliance, especially for small- and medium-sized entities. The burden of staying compliant can add up, so this is a positive suggestion to ease the cost of doing business and lowering the barriers to market entry.
There is an increased focus on customer self-service and omni-channels to engage. The FSCA is in the process of a major digital overhaul and upgrade as part of its Data Driven Digital (DDD) sub-strategy, which looks to turn the FSCA into a ‘next generation digital regulator’.
A Transformation Strategy will be developed. This will guide FSCA operations, and the current draft strategy is available for public comment until 29 April. The FSCA will also integrate and monitor the implementation of transformation plans into the supervisory framework for financial institutions.
The FSCA will apply transformation licensing conditions and other provisions to legislation. This would include the Conduct of Financial Institutions (COFI) Act or other financial sector laws that cater for transformation commitments aligned to the Financial Sector Code (FSC). The FSC seeks a transformed and globally competitive financial services sector that accurately reflects the nation of South Africa and provides access for all.
The FSCA plans to be more active in the transformation process. The regulator will be monitoring the progress of transformation plans, assisting with driving the achievement of commitments to FSC targets, including the consequences for failure to demonstrate progress. Enhanced accountability is a recurring theme in the FSCA’s strategy.
There will also be the roll out of the Omni CBR Report for regulated institutions. All licensed financial entities will submit a variation of a single Conduct of Business return.
A keen focus is FinTech. A FinTech Department is to be established at the FSCA, suitably resourced and actively engaged with FinTech start-ups and incumbents using FinTech. This is certainly a sign of the technology-enabled times, as we already have the Inter-governmental Fintech Working Group (IFWG) in place, with pending cryptocurrency regulation and recommendations out soon.
The COFI transition. A huge focus for the FSCA is its readiness for a smooth transition to the overarching licensing and conduct standards framework under the COFI Act. This is a major shift but also makes way for new regulation around modern aspects of financial services, such as Fintech. We’ve been talking about ‘COFI cometh’ for some time and do expect to see some movement this year.
Being prepared includes managing expectations, and it’s important to understand what the regulator expects going forward. The above summarises just a few of the focus areas, or developments that could reshape compliance in financial services. It’s important to keep your ear to the ground, always.