Signed into law in August 2017, the Financial Sector Regulation (FSR) Act was effective from 1 April 2018. It’s a piece of legislation that will bring about a major transformation of the South African financial services regulatory and risk management framework, including the move to a Twin Peaks approach to regulation.
The Twin Peaks approach sees the regulation of prudential and conduct risk separated out under the supervision of two distinct regulatory bodies. The Prudential Authority (PA) contained within the South African Reserve Bank (SARB) and the Financial Sector Conduct Authority (FSCA).
The current Financial Services Board (FSB) will ultimately be replaced by the FSCA. And the SARB will become the resolution authority responsible for protecting, maintaining and enhancing financial stability.
By restructuring the regulatory system, the FSR Act aims to increase its robustness, reinforce financial stability and integrity. And improve protection for customers from potential poor conduct by financial services firms.
There are no longer separate regulators for banks and insurers. The new regulators have the power to create regulatory standards and have supervisory tools and enforcement powers at their disposal, to enable them to fulfill their objectives.
Various councils and committees are being created with the objective of facilitating effective collaboration and co-operation between the regulatory bodies. Sanctions may be imposed on organisations and individuals found to be in contravention of financial sector laws and regulations in the scope of the FSR Act.
Other objectives of the Act include ensuring fair treatment of customers and productivity of the financial system, the prevention of financial crime, monetary consideration, changes of the sector and trust in the financial system.
The FSR Act also makes provisions for licensing, supervision and enforcement for authorised entities, and additionally measures for complaints resolution and customer education. The FSR Act aims to improve the structure of the regulation of financial services by ensuring more consistent and complete regulation. It gives the PA and the FSCA jurisdiction over all financial institutions and will provide them with a range of supervisory tools to fulfill their objectives.