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BY Angela Itzikowitz , Era Gunning , Jessica Blumenthal , Amelia Warren AND Dylan Martheze
COFI heads to Parliament: A new era for financial conduct regulation
Cabinet’s approval of the Conduct of Financial Institutions Bill (“COFI”) for submission to Parliament is a significant development for South Africa’s financial sector. If enacted, COFI would mark one of the most important shifts in market conduct regulation since the adoption of the Twin Peaks model. It is designed to create a single, holistic framework for regulating the market conduct of financial institutions across the sector, rather than continuing with the fragmented position in which different rules and standards are spread across multiple industry-specific laws.
That matters because COFI is not simply another compliance statute. At its core, it is about how financial institutions treat customers, how conduct standards are applied across different business models, and how regulation can respond more coherently to a financial sector in which banks, insurers, investment firms and fintechs increasingly overlap. National Treasury’s policy paper explains that the Bill is intended to streamline and harmonise the legal landscape for market conduct regulation, so that the same broad conduct principles can be applied consistently across all financial institutions.
For customers, the most immediate significance is the Bill’s emphasis on fair treatment. Cabinet stated that COFI is aimed at ensuring fair customer treatment, promoting stability and supporting a safer financial sector that operates in the interests of consumers. That speaks directly to longstanding concerns in the sector: complex products sold to poorly informed customers, inconsistent disclosure practices, and regulatory silos that can make similar conduct look acceptable in one corner of the market and problematic in another. COFI’s promise is not that every risk disappears, but that conduct regulation becomes more coherent, more visible and more focused on customer outcomes.
The Bill is also notable for its transformation dimension. Cabinet expressly said COFI would support transformation in the financial sector and require financial institutions to have policies in place to comply with the Financial Sector Code. That is an important signal. Transformation is not being treated as a separate policy conversation happening outside prudential and conduct regulation. Instead, it is being drawn more directly into the governance and policy expectations applicable to financial institutions themselves. If that approach is retained in the parliamentary process, COFI will not only reshape conduct regulation, but also reinforce the role of financial institutions in advancing broader structural change within the sector.
There is another reason this Bill matters. It may materially affect competition. Cabinet has said COFI supports market development and competition by enabling a differentiated approach to licensing, specifically to foster the entry of new players such as fintechs. That is potentially significant for a market in which regulatory complexity can itself operate as a barrier to entry. A more activity-based and proportionate framework could make it easier for innovative firms to enter the market without being forced into regulatory categories designed for far older business models. This does not however mean lighter regulation. It means regulation that is intended to be clearer, more consistent and better matched to the actual conduct risks posed by the activity being performed.
That activity-based design is one of the Bill’s most important features. Treasury’s policy paper indicates that COFI forms part of the next phase of conduct reform under Twin Peaks and is intended to replace a patchwork of conduct-focused provisions with a unified framework. This will affect not only traditional institutions, but also digital and hybrid business models that do not fit neatly into legacy regulatory categories. In that respect, COFI is as much about the future shape of the market as it is about present-day compliance.
Of course, Cabinet approval is not the end of the story. The Bill must still go through the parliamentary process, and its final form will matter greatly. But the policy direction is now unmistakably clearer. South Africa is continuing to focus on a conduct regime, but the emphasis will clearly be more unified, customer-centred and responsive to competition and innovation across the financial sector.
For financial institutions, this is a development worth watching closely. COFI is not only about new rules. It reflects a deeper regulatory expectation that customer outcomes, transformation, governance and market access should be treated as connected issues rather than separate compliance silos. If enacted in substantially its current form, the Bill could reshape how institutions design products, structure internal policies and approach market conduct strategy in the years ahead.
Should your organisation have questions about the potential impact of the COFI Bill’s approval, please get in touch with the authors below.
Angela Itzikowitz
Executive | Banking and Finance
Era Gunning
Executive | Banking and Finance
Jessica Blumenthal
Executive | Banking and Finance
Amelia Warren
Associate | Banking and Finance
Dylan Martheze
Candidate Legal Practitioner | Banking and Finance
