Need for stronger regulatory oversight
To give perspective, market conduct is not new in South Africa and our regulators have been grappling with how to ensure the fair treatment of customers for years through existing financial sector specific legislation.
The current legislative framework is considered to be fragmented, inconsistent, and incomplete across the financial sector and too institutionally focused (as opposed to functionally focused), which in turn compromises the effective supervision of market conduct by the regulators.
As such, it was identified that the need for a holistic and coordinated market conduct regulatory framework that applies consistently across the financial sector can best be achieved through structural change to the regulatory framework and through the creation of a dedicated market conduct regulator – the FSCA.
Market conduct will introduce a distinct shift in the manner and approach to the regulation and supervision of the financial services industry by the FSCA, and a change in what institutions will need to do to ensure compliance.
The FSCA will move away from a rules based, reactive, tick-box compliance approach, to a principle based, forward looking, pre-emptive, outcomes focused and risk-based approach.
Institutions should, as a first step in their market conduct journey, perform an assessment of their business model and strategy with the aim of identifying and assessing those conduct risks prevalent in their business. To be able to manage, monitor and measure conduct risks, those conduct risks must first be identified and assessed.