Although the implementation of TCF is guided by the six broad fairness outcomes; clear, enforceable rules and regulations must also be in place to ensure that these outcomes are achieved.

The FSCA has developed a regulatory framework that effectively balance principles- based and rules-based regulation to ensure that FSP’s deliver the desired outcomes of discipline and transparency in a consistent manner.

The fit and proper requirements issued under Board Notice 194 of 2017 together with the General
Code of Conduct entrust the following fiduciary duties to FSP’s in terms of the fair treatment of customers:

• An FSP must adopt, document, and implement an effective governance framework that provides for the fair treatment of clients and prudent management and oversight of the business of the FSP.
• The governance framework of an FSP must include effective and adequate systems of corporate governance, risk management (including conduct risk management) and internal controls that includes sound and sustainable remuneration policies and practices which promote the alignment of interests of the FSP with those of its clients and which avoid excessive risk taking and unfair treatment of customers.
• An FSP and representatives must render financial services honestly and fairly, with due skill, care, and diligence, in the best interests of clients and in the interest of the integrity of the financial services industry. Financial service providers must not fit TCF into compliance but fit compliance into TCF.

Achievement of the TCF outcomes is the responsibility of senior management of the financial services provider.

For the TCF initiative to be successful, FSP’s must be able to provide evidence that they are treating their customers fairly and have embedded TCF in their culture.

Measurement must be done by implementing management information mechanisms that will monitor the level of adherence to TCF and by completing self-assessment questions.

FSP’s are required to develop management information (MI) mechanisms to monitor and measure performance in delivering the six fairness outcomes.

FSP’s are expected to use their management information mechanisms and commentary to assess their own success rates in delivering TCF outcomes and to use the findings of their self-assessments to set company- specific TCF goals and raise their TCF standards where areas for improvement are identified.

FSP’s are advised to develop their own self-assessment tools that are appropriately tailored to their own business models.

The FSCA enforces delivery of the TCF outcomes by imposing comprehensive and demanding disclosure and reporting requirements. Requirements include public and non-public disclosure of identified TCF performance measures.

Items which firms are required to disclose publicly.

• Measure relating to claims statistics for example, repudiations, disputes, and timelines.
• Complaint’s volumes and responses.
• Adherence to service levels.
• Investment performance against benchmarks.
• Regulatory interventions.

Care must be taken to ensure that public disclosure leads to fair and meaningful comparisons between firms and sectors – that “apples are compared with apples”.

The FSCA also enforces adherence to the framework. It will first negotiate any corrective action by engaging with the firm’s senior management. Where this fails or where the FSCA considers that there is a serious risk to customers or unacceptable conduct on behalf of the financial services provider, it takes formal action against the financial services provider.

The FSCA’s current enforcement powers include the following:

Administrative fines and penalties

  • Declaration of business practices to be undesirable, with associated powers to order cessation or amendment of the practices concerned.
  • Suspension or withdrawal of financial services licenses.
  • Termination or withdrawal of the approval of certain individuals to act in certain capacities for example, debarment of representatives.
  • Damages and compensation awards (including punitive damages).
  • Referral of certain matters to the High Court.
  • Referral to the National Prosecuting Authority for criminal prosecution of individuals, where a statutory or common law criminal offence is commit