Kedibone Dikokwe
Divisional Executive:
Conduct of Business Supervision

Key focus areas for the division:

• Implementing recommendations from the Financial Sector Assessment Program (FSAP) AND Financial Action Task Force (FATF) Mutual Evaluation.
• Rolling out multi-year Omni-CBR industry engagement and implementation roadmap.
• Reviewing current conduct of business supervisory operating model and develop a harmonised supervisory framework implementation strategy.
• Assess opportunities to provide capacity and implementation support to small and emerging business in respect of ongoing regulatory and supervisory developments.
• Evaluating and engaging on supervisory implications of the State Capture Report findings for affected financial institutions and the broader financial sector.
• Contributing to the inter-regulatory project on the strategic review of funeral insurance legislative framework.
• Contributing supervisory perspectives on Sustainable Finance initiatives.
• Developing consistent and proportional approaches to entity governance.

Makgompi Raphasha
Departmental
Head: Insurers Supervision

Concerns identified in the relationship between insurers and FSPs:

• Insurers are struggling to get quality data from FSPs: CBR submissions, transfer of books without policyholder contact information
• Insurer’s lack of oversight of FSPs: Binders, intermediary, outsourcing arrangements
• Compliance audits focused on FAIS compliance and not on insurance compliance
• FSPs responding to complaints in a manner which highlights that the insurer is not owning the conduct concerns that impact the policyholder
• Excessive/double remuneration of FSPs
• FSPs not having PI cover in place
• Poor governance over premium collection
• Increasing concerns around smaller insurers in financial distress and impact of this on policyholders

Sindiswa
Makhubalo
Departmental Head:
Banks and Payment
Providers

The role that compliance plays in market conduct:

• “Judgment-based” approach to conduct risk management.
• Asks questions relating to the “rightness” of a particular course of action or decision – even if not explicitly prohibited in regulation.
• Focuses on outcomes of actions and decisions by business.
• Helps to create an audit trail of decision making by senior management – rationale for decision making linked to fair customer outcomes.
• Advises business on how to align strategic business decisions with supervisory expectations relating to fair customer outcomes (e.g., impact of business model changes, acquisition of distribution channels, geographic expansion/reduction initiatives).
• Provides assurance on adequacy of conduct reporting submitted to the FSCA.

Thabang
Malimabe
Specialist:
Financial Advisors

Key insights from the recent Financial Soundness Survey conducted by the FSCA:

• The main business of most of the respondents is that of a financial advisor or brokerage
• 0,65% of FSPs do not classify subordinated loans as current liabilities, nor as a non-current liability
• 2.3% have applied for the exemption from financial soundness requirements
• The number of FSPs that apply for exemption increases over time
• Covid-19 restrictions and load shedding were the main events that adversely affected the FSPs income
• 6.6% of FSPs reduced its staff complement due to external economic impact
• The majority of FSPs submit financial statements via online system
• FSPs that collect premiums use internal services providers to maintain their monthly accounting records

Jacky Huma
Departmental Head:
Micro and Access
Product Providers

The Funeral Parlour Inter-Regulatory Strategy:

• There is a PA/FSCA task team established to review the appropriateness of current regulatory framework and approach for distribution of funeral insurance.
• The objectives of the strategy will be:

• To address informality and encourage development of an inclusive market
• To highlight the important contribution by funeral parlour industry to SA’s BEE objectives
• To address business practices that serve as barriers to becoming compliant

Chwayita
Mtebele
Departmental Head:
Investment Providers

Key insights from the Market Conduct Risk Survey of the Investment Providers Industry:

• The study explored Five key elements that are pertinent to the conduct risk agenda based on international research: Corporate culture; Product lifecycle risks; Business model and processes; Contextual factors and monitoring and reporting.
• Although the responsibility for conduct risk management has been formally designated to senior and executive individuals within the businesses, there is limited articulation on the market conduct considerations by some Investment Providers.
• The market conduct risk agenda for most entities is not a separate consideration.
• Some entities do not demonstrate that there has been a marked shift from solely applying TCF principles to ensuring good market conduct across business processes, products, and customer interaction.
• Very few Investment Providers have a dedicated and approved market conduct risk framework in place.
• Some Investment Providers do not agree that product lifecycle risks are present in the context of their businesses.
• A preliminary indication is that a lot more work needs to be done in relation to the conduct risk agenda, especially in areas of clearly articulating consequences for misconduct, developing key risk indicators that are less focused on rule breaches and policy compliance.

Charl Geel
Departmental Head:
FICA Supervision

The placing of South Africa on the FATF grey list:

• The grey list lists countries that are actively working with the FATF to address strategic deficiencies in their regimes to counter ML/ TF/ PF.
• When the FATF places a jurisdiction on the grey list, it means the country has committed to swiftly resolving the identified strategic deficiencies within agreed time frames and is subject to increased monitoring.
• There are currently 23 countries on the grey list.
• South Africa has an action plan to address the deficiencies identified by FATF.
• The action plan also contains deadlines for completion of the remedial action. The deadlines range from a year to 18 months.
• However, the sooner we remediate the deficiencies, the sooner South Africa will be removed from the grey list.
• South Africa needs to report three times a year i.e. at each FATF plenary on progress made in remediating the deficiencies.