From FAIS to COFI: Preparing for a New Era of Market Conduct

The Evolution from FAIS to COFI

South Africa’s financial sector is entering a significant regulatory transition. The proposed Conduct of Financial Institutions (COFI) Bill is designed to replace the Financial Advisory and Intermediary Services (FAIS) Act, moving the industry from a rules-based compliance framework to a principles- and outcomes-based regime. While FAIS and the Treating Customers Fairly (TCF) framework focused primarily on intermediaries and licensing, COFI aims to create a holistic standard of conduct for all financial institutions, including banks, insurers, asset managers, and credit providers.

FAIS established the foundation for market conduct supervision, ensuring that financial service providers act honestly, fairly, and in the interests of their clients. TCF built on this foundation, defining six client-focused outcomes spanning product suitability, transparency, disclosure, post-sale support, and redress. While these frameworks advanced fairness, they remained largely procedural. Institutions could demonstrate compliance through documentation, licensing, and policies without necessarily embedding conduct risk management into daily operations, leaving gaps in accountability and oversight.

The Shift in Regulatory Approach

COFI represents a fundamental shift. The FSCA will oversee conduct across all financial institutions, while the Prudential Authority maintains prudential supervision. Unlike FAIS, which emphasized rule adherence and licensing compliance, COFI focuses on outcomes: institutions must demonstrate that processes, behaviours, and decisions result in fair treatment for customers. Conduct risk is elevated to a board-level concern, requiring active oversight by senior management, who must ensure governance, incentive structures, product design, and customer interactions collectively achieve fair outcomes.

The COFI Bill is principles-based rather than prescriptive, meaning that institutions are expected to operationalise conduct risk throughout the enterprise. Compliance cannot simply be an administrative exercise; customer outcomes must be measurable and demonstrable. This includes assessing product suitability, the quality of advice, timeliness of service, dispute resolution, and the effectiveness of internal controls. Institutions that rely solely on policies or senior management sign-offs will struggle, while those embedding conduct into culture and operations will be positioned to succeed.

Activity-Based Licensing and Operationalisation

A notable feature of COFI is the activity-based licensing model, where institutions are licensed according to the services they provide rather than their legal structure. This allows the regulator to align oversight with risk, but it also places the onus on institutions to map activities, identify associated conduct risks, and design proportionate controls. Operationalising this risk requires that procedures are applied consistently, monitored effectively, and continuously improved. Boards and senior management must be able to demonstrate that institutional conduct aligns with the principles of fairness, not just with policies or internal appetite statements.

Measuring and Evidence-Based Assurance

Under COFI, confidence in an institution’s ability to deliver fair outcomes must be data-driven. Institutions will need to show, through evidence, that products, services, and advice consistently meet the needs of clients. Metrics may include complaint volumes, claims settlement times, suitability assessments, and customer feedback. Data-driven assurance allows organisations to identify gaps, improve governance, and make decisions that lead to better outcomes. COFI signals a move away from a paper-based compliance culture to one where verification, measurement, and accountability are core expectations.

The Cultural Imperative

The transition from FAIS to COFI is not just regulatory but cultural. Institutions must foster a culture of customer-centricity and accountability, embedding conduct risk into day-to-day operations. Boards and senior executives cannot delegate responsibility solely to compliance functions; conduct must influence strategy, product development, distribution, and post-sale service. Regulatory focus will assess not only policies but also evidence that culture and behaviour support fair outcomes.

Ample Vista’s Perspective

At Ample Vista, we see the bigger picture — it is our mandate to anticipate regulatory change and guide our clients through the full development journey. We work alongside institutions to translate complex requirements into practical frameworks and processes that are operationally effective and fit for purpose. This ensures that COFI readiness is not just a compliance exercise on paper, but a tangible, implementable strategy embedded into how an institution operates day to day.