President Jacob Zuma signed the Financial Sector Regulation Act on Monday 20 Aug 2017. This Act aims to achieve a financial system that will work in the best interest of financial clients, and will support a sustainable and balanced growth for the country. It will establish a regulatory and supervisory framework in conjunction with other financial sector laws, which will promote:
1) Financial stability; 2) The safety and soundness of financial institutions; 3) The fair treatment and protection of financial customers; 4) The efficiency and integrity of the financial system; 5) The prevention of financial crime; 6) Financial inclusion; 7) Transformation of the financial sector; and 8) Confidence in the financial system
This Act will also establish two new financial sector regulators, namely the Financial Sector Conduct Authority, and the Prudential Authority. These will have jurisdiction over all financial institutions, and will provide them with various tools to fulfil their objectives in their supervisory role.
It will also ensure that there is co-operation and interaction between the financial sector regulators, the NCR, the FIC and the SARB.
What is the FSR Act?
The Act shifts decisions to a Twin Peaks model of financial sector regulation. Under this model, two regulators will be established – a Prudential Authority (PA) within the SARB and a new Financial Sector Conduct Authority (FSCA). The FSCA is currently known as the FSB.
The PA will supervise the safety and soundness of financial institutions while the FSCA will supervise how financial services firms conduct their business and treat customers. The SARB will continue to oversee financial stability within a policy framework agreed with the Minister of Finance.
The FSR Act is now law and now has to be published on The Gazette. This publication will specify timelines for the implementation of the Act and when the Act will be effective. One should take note that the Act relates to the structure of the regulatory environment itself and only has limited effect on operational matters at individual financial service providers.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)