1. TWIN PEAKS ARRIVES – THE FINANCIAL SECTOR REGULATION ACT, 2017 BECOMES LAW
Fiona Rollason

2. Twin Peaks Arrives
Former President signed the Financial Sector Regulation Act into law
Introduces the twin peaks regulatory framework to South Africa
Different effective dates will apply to different sections

3. Purpose of the Act
The Act establishes a regulatory & supervisory framework that promotes:
Financial stability, safety & soundness
Fair treatment & protection of customers
Efficiency & integrity of the financial system
Prevention of financial crime
Financial inclusion
Transformation of the financial sector
This Act applies over other financial sector laws

4. Who and what is covered by the Act?
‘Financial institutions’ - product and service providers & persons licensed under financial sector law
‘Financial products’ - long-term insurance policy & benefits provided by funds
‘Financial services’ - advice & administration services
‘Financial sector law’ - Pension Funds Act & Long-term Insurance Act

5. New authorities created under the Act
Financial System Council of Regulators – ensure co-operation between Government & regulators
Financial Sector Conduct Authority –market conduct regulator. Promotes fair treatment of customers & provides financial education
Prudential Authority - juristic entity in SARB. Promotes safety & soundness of institutions

6. Financial Sector Conduct Authority
Regulate funds & administrators in line with the Act and the Pension Funds Act
Outcomes focused & risk based approach
Commissioner and 2 to 4 deputy Commissioners
Three year strategy published to explain the regulatory & supervisory priorities

7. Regulatory instruments
Acts sets out the procedure to be followed in issuing new regulatory instruments.
Instruments may deal with:
fit and proper requirements
governance and duties of key persons (such as trustees)
record- keeping, data management & safekeeping of assets
financial management
operational requirements
outsourcing & business continuity
conflicts of interest

8. Regulatory Instruments
Prudential standards
Issued by the PA & relate to ensuring financial stability
Conduct standards
Issued by the FSCA & apply to institutions or representatives
Deal with the fair treatment of customers, including product design, marketing, complaint resolution & disclosure of information
Joint standards

9. Licensing
A person providing financial products & financial services must be licensed to do so
The Act deals with licences granted in terms of financial sector laws, including the Pension Funds Act
No licence may be issued, varied, suspended or revoked by one regulator without the agreement of the other regulator (the PA and FSCA going forward)

10. Information gathering, supervisory on-site inspections and investigations
The FSCA can request information or documents from funds and administrators
On-site inspections may take place, with prior notification to the entity
The FSCA may appoint an investigator to carry out an investigation
An investigator can enter premises with or without prior consent

11. Enforcement
Guidance notices non binding interpretation on the application of financial sector law
Interpretation rulings statements for clarity, consistency & certainty on the law
Directives institution or key person must perform the action as per the directive
Enforceable undertakings given by a person to the regulator about their future conduct
Court proceedings by a regulator to ensure compliance with financial sector law
Debarment orders issued for contravening a local or foreign financial sector law or an enforceable undertaking or if they try to persuade someone else to contravene a financial sector law
Leniency agreements for a person who co-operates with an investigation

12. Administrative penalties
Penalties imposed by regulator against a person for contravening law or an enforceable undertaking
Many factors to be taken into account: seriousness, duration, deterrence, loss suffered, prior offence, benefit of the wrongdoer, deliberate or reckless
Cannot indemnify or compensate someone for having to pay a penalty

13. Ombud Council
Customers have access to affordable, effective, independent & fair dispute resolution processes
Council will recognize industry ombuds, promote co-operation, resolve jurisdictional overlap, set rules & monitor performance
An industry ombud scheme may apply to the Council for recognition
Call centre - assist in formulating complaints & relevant ombud scheme
If no existing ombud for a specific complaint, Council can instruct an ombud to deal with it

14. Financial Services Tribunal
Reconsider decisions made by a regulator, the Ombud Council, a statutory Ombud or a licensed financial services provider
Tribunal members – 2 retired judges & 2 people with financial services experience
Can dismiss a case or ask the decision-maker to review their decision or make a new decision
The Tribunal’s order can have the same effect as a civil judgment
A court can review a Tribunal order

15. Information sharing and reporting
Regulators, ombuds & state bodies may collect, use, share & disclose information, including personal information
Regulators must liaise & enter into agreements to co-ordinate reporting & sharing of information
An institution’s auditor must report any matter to the PA which may cause the institution to be financially unsound or any contravention of financial sector law
If someone reports a contravention, they cannot be held criminally liable, pay compensation or be victimised

16. Fees and Levies
A regulator can charge fees and levies under this Act & financial sector laws, to fund its activities
Fees & levies must be published
Different fees & levies can apply to different types of entities

17. Financial Sector Information Register
National Treasury will establish a Register to provide reliable electronic access to accurate, authoritative and up to date information on financial sector laws
The public will be able to access this Register
The Act lists all the documents to be published on the Register

18. Offences and penalties
Examples of penalties include:
institution acting without a licence or non compliance with an enforcement order – R15 million or 10 years in prison or both
failing to report as required under the Act – R5000 every day the offence continues
failing to publish or disclose a licence – penalty of R50 000
not meeting the requirements of an inspection or investigation – fines of R1 to R5 million
Possible fines for regulators or for persons working at a regulator
Indemnity for regulators for loss suffered by someone because of a decision taken in good faith

19. Transitional arrangements
PA power to ensure financial soundness of funds will be delegated to FSCA for 3 years
Transfer of activities from the FSB to the FSCA
FSB Appeal Board & Enforcement Committee will cease to exist
Licences in force before the Act will remain in force

20. Changes to the Pension Funds Act
New definitions – Authority, Act, standards, Register. Tribunal
Delete definitions – FSB, Registrar
A new section deals with the relationship between the PFA and the Act
The Adjudicator must take into account: equity, contractual relationships & the Act

21. Draft Regulations
Transitional arrangements to allow FSB to perform functions of the FSCA
Process to be followed in appointing the Commissioner and Deputy Commissioners of the FSCA

22. THANK YOU