The COFI Bill Explained: How Conduct Regulation Is Changing in South Africa

South Africa's financial conduct regime is evolving. The FAIS Act has governed how financial services are rendered for over two decades, but a broader, more ambitious framework is on the horizon: the Conduct of Financial Institutions (COFI) Bill. For financial advisors — and for anyone studying the RE5 — it is worth understanding where regulation is heading, even though FAIS remains the law you are examined on today.

This guide explains the COFI Bill in plain language: what it is, why it exists, and how it fits into the wider Twin Peaks model of financial regulation.

The Twin Peaks Foundation

To understand COFI, you first need to understand Twin Peaks. Introduced by the Financial Sector Regulation Act (FSR Act), Twin Peaks split financial regulation between two authorities:

• The Prudential Authority (PA), housed within the South African Reserve Bank, which focuses on the safety and soundness of financial institutions
• The Financial Sector Conduct Authority (FSCA), which focuses on market conduct — how institutions treat their customers

The FSCA replaced the former Financial Services Board and is the conduct regulator you already know from your RE5 studies. COFI is the next major step in building out the conduct peak of this model.

What Is the COFI Bill?

The COFI Bill is proposed legislation designed to create a single, comprehensive conduct framework for the entire financial sector. Today, conduct requirements are spread across many different laws — the FAIS Act, the Long-Term and Short-Term Insurance Acts, banking legislation, and more. COFI aims to consolidate and harmonise these into one coherent body of conduct law administered by the FSCA.

In essence, COFI would take the principles that FAIS applies to financial advice and intermediary services and extend a consistent conduct standard across all financial institutions — banks, insurers, investment managers, and advisors alike.

Key Features of the Proposed Framework

While the Bill continues to move through the legislative process and its final form may change, several themes are central to its design:

Activity-Based Licensing

Rather than licensing institutions by narrow product category, COFI moves toward activity-based licensing — regulating institutions according to the financial activities they perform. This is intended to close gaps where similar activities were regulated differently depending on the type of institution performing them.

Treating Customers Fairly at the Core

The Treating Customers Fairly (TCF) outcomes — already familiar to RE5 candidates — are set to become even more central. COFI is designed to embed fair customer treatment as a legal expectation across the sector, not just a principle applied to advice.

Transformation and Inclusion

COFI places emphasis on financial inclusion and transformation, reflecting broader policy goals of a more accessible and representative financial sector.

A Principles-Based Approach

COFI leans toward a principles-based and outcomes-focused style of regulation. Rather than prescribing every rule in fine detail, it sets out the outcomes institutions must achieve, giving the FSCA flexibility to supervise conduct across a diverse sector.

What COFI Means for the FAIS Act

A natural question is: what happens to FAIS? The intention is that COFI will, over time, absorb and replace much of the conduct content of the FAIS Act and other sector laws. The transition is expected to be phased, with existing licences and requirements carried across in a managed way so the industry is not disrupted.

For now — and for your exam — FAIS remains in force. The RE5 tests the current FAIS framework, the General Code of Conduct, and the existing Fit and Proper requirements. COFI is important context, but it does not change what you are examined on today.

What This Means for Financial Advisors

Even though COFI is not yet the operative law, forward-thinking advisors should:

• Understand the direction of travel — conduct regulation is becoming broader, more consistent, and more outcomes-focused
• Embed TCF genuinely in how they work, since fair customer treatment is only becoming more central
• Keep record-keeping and advice standards high, as these expectations will carry through any transition
• Stay informed through their FSP, compliance officer, and industry updates as the Bill progresses

Advisors who already treat customers fairly and follow the FAIS advice process properly are well positioned for whatever final shape COFI takes.

Why This Matters for the RE5 Exam

The RE5 is grounded in current legislation, so you will not be examined on the fine detail of a Bill that is not yet law. However, understanding the regulatory landscape — Twin Peaks, the FSCA's conduct mandate, and the direction of reform — helps you place the FAIS framework in context and answer questions about the roles and functions of the regulators with confidence.

Focus your exam preparation on the current FAIS framework, but keep COFI in mind as the backdrop that explains why conduct standards look the way they do.

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