- South Africa plans a major regulatory overhaul for its financial institutions over the next three to five years, aiming to modernize the sector and align it with international standards.
- Key legislative changes include the Conduct of Financial Institutions Bill and amendments to the Financial Markets Act, focusing on streamlining licensing, enhancing disclosure requirements, and improving market surveillance.
- The Financial Sector Conduct Authority will also work on digitizing its systems to facilitate better reporting and information sharing, addressing the concerns raised by the Financial Action Task Force and recent cryptocurrency scams.
South Africa is poised to undertake a comprehensive set of legislative modifications within the next three to five years, with the goal of modernizing the regulatory infrastructure governing its financial institutions and aligning it with international best practices.
Over the past several years, South Africa has been slow to adopt new rules and regulations, causing the country to fall behind its global counterparts. This has diminished South Africa’s appeal as an investment hub, as noted by Astrid Ludin, deputy commissioner at the Financial Sector Conduct Authority (FSCA).
To address these concerns, the National Treasury is currently finalizing the Conduct of Financial Institutions Bill, which will soon be presented to parliament. The proposed legislation aims to simplify the licensing process for financial institutions, while also strengthening disclosure requirements to offer increased transparency into their operations.
In addition, the Financial Markets Act is undergoing a thorough review, with proposed amendments expected to be submitted to lawmakers by the end of the year. These changes will encompass enhanced oversight of short selling and securities financing transactions, as well as the introduction of more stringent pre- and post-trading data disclosure requirements to bolster market surveillance efforts.
Ludin emphasized in an interview that these modifications are essential for ensuring “that the South African regulatory framework is appropriate for the environment that we are in, that we keep abreast of the changes that have happened internationally.” She also noted that the country’s “big regulatory agenda” over the next few years will need to be carefully managed to strike a balance between the industry’s impact, South Africa’s global competitiveness as a market, and the effect on investors.
The announcement of this planned legislative revamp follows the Financial Action Task Force (FATF), a Paris-based global financial watchdog, placing South Africa on its “grey list” in February. This designation highlights the nation’s inadequacies in addressing illicit financial activities and combatting the financing of terrorism.
South Africa has also been the origin of two significant cryptocurrency scams, which led to investors losing billions of dollars. In response, the FSCA is dedicating the next three years to enhancing its digital systems. These improvements will allow the organization to streamline its reporting requirements, eliminate redundancies, and facilitate information sharing with other regulatory bodies, such as the prudential authority and the Financial Intelligence Centre.
With these sweeping changes in the pipeline, South Africa is poised to fortify its financial sector’s regulatory framework, thereby reestablishing its standing as an attractive and well-regulated investment destination in line with international standards.