South Africa regulates financial institutions through a patchwork of laws written for an older market — separate statutes for banks, insurers, advisers and funds, each with its own conduct expectations and its own gaps between them. The result is a system that supervises products and entities reasonably well but treats the customer’s experience as an afterthought. The Conduct of Financial Institutions Bill is the state’s attempt to invert that order and put conduct at the centre.

Cabinet has approved the Conduct of Financial Institutions (COFI) Bill, 2026, creating a consolidated market-conduct framework. The Bill imposes governance and BEE-transformation obligations, prescribes advertising and disclosure principles, and empowers the Financial Sector Conduct Authority to set conduct standards. Taken together, it is a move from rules scattered across many laws to a single, principle-led regime for how financial firms must treat their customers.

The Architecture: One Conduct Framework, Many Sectors

The defining feature of COFI is consolidation. Instead of a bank, an insurer and an advisory firm each answering to different conduct provisions in different statutes, the Bill brings market conduct under one roof, with the FSCA empowered to set standards that apply across the sector. That matters because conduct risk does not respect product boundaries — the same poor disclosure or mis-selling can occur whether a customer is buying a policy, a loan or investment advice.

A consolidated framework also closes the seams between regimes, where conduct problems have historically slipped through. A firm that structured a product to fall between two statutes faces a harder task when a single conduct authority can reach the activity regardless of its legal label.

This consolidation is the conduct half of the broader supervisory model South Africa has been building, in which a prudential regulator watches the safety and soundness of institutions while a conduct regulator watches how they treat customers. COFI gives that second pillar a coherent legal foundation rather than a borrowed one assembled from older sector laws. For a sector as large and interconnected as South Africa’s — where the same group may run a bank, an insurer and an asset manager under one roof — a single conduct standard applied across the group is more workable than three overlapping ones.

Takeaway: COFI regulates the behaviour, not the box the product happens to sit in.

The Shift: From Rules to Principles and Standards

COFI empowers the FSCA to set conduct standards rather than freezing every requirement in primary legislation. This is a deliberate design choice. Detailed rules age quickly as products and distribution channels evolve, and amending an Act each time is slow. Empowering the regulator to issue standards lets the conduct regime keep pace, while the principles in the Bill — fair treatment, honest advertising, clear disclosure — set the direction those standards must serve.

The Bill’s advertising and disclosure principles deserve particular attention. Much conduct harm originates at the point of sale, in how a product is marketed and what the customer is told before committing. By prescribing principles for advertising and disclosure, COFI targets the moment where trust is most often won or lost.

For compliance teams, the practical consequence is a more responsive but less predictable rulebook. Standards can be issued, updated and tightened, so conduct compliance becomes a continuous function rather than a fixed checklist.

Takeaway: a principle-led regime asks firms to defend outcomes, not just tick rules.

The Obligations: Governance and Transformation Together

COFI does not treat conduct in isolation. It imposes governance obligations and BEE-transformation obligations within the same framework, signalling that the regulator views how a firm is run and who it serves as part of conduct, not separate from it. Folding transformation duties into the conduct regime gives the FSCA a clearer line of sight into both, and raises the stakes for firms that have treated transformation as a reporting exercise rather than a structural one.

For the financial sector — banks, insurers, asset managers and advisory firms alike — the combined effect is a broader definition of what good conduct means. It is no longer only about disclosure and fair pricing, but also about governance quality and the firm’s transformation record, assessed together.

Takeaway: under COFI, governance and transformation are conduct questions, not side filings.

The Reach: From Large Houses to Small Advisers

A single conduct framework lands unevenly across a sector that ranges from JSE-listed financial groups to two-person advisory practices. Large institutions already carry conduct, compliance and transformation functions, and for them COFI is largely a question of consolidating and tightening what exists. Smaller firms — independent brokers, boutique advisers, niche fund managers — face a steeper adjustment, because a principle-led regime with continuous standards assumes a compliance capability they may not yet have built.

That unevenness is worth watching, because conduct harm does not scale neatly with firm size, and a regime that is too heavy for small firms risks pushing advice out of reach for ordinary customers while one that is too light leaves the same customers exposed. How the FSCA calibrates its standards — proportionate to size and risk, or uniform across the board — will determine whether COFI strengthens the market’s edges or thins them. For an operator, the signal is to read forthcoming standards not only for what they require but for how they scale.

Takeaway: the same conduct principle costs a small adviser far more, proportionally, than a large group — and the calibration will decide who survives it.

The Transition: From Approval to Application

Cabinet approval is a milestone, not the finish line. A Bill must still complete the legislative process before it binds, and the FSCA’s conduct standards — where much of the operational detail will live — typically follow the primary law rather than arrive with it. The interval between approval and full application is where firms get their preparation done or fall behind.

The sensible posture for financial houses is to read the Bill as a statement of direction and begin aligning now: mapping current conduct, governance and transformation practices against COFI’s principles, and identifying where a future FSCA standard is most likely to bite. Firms that wait for final standards before acting will compress that work into a shorter window under more pressure.

The So-What: Build for Principles, Not Just Rules

For executives and compliance leaders across South Africa’s financial sector, COFI reframes the compliance task. The question shifts from “which rule applies to this product” to “can we show this outcome is fair, well-governed and consistent with the conduct standards.” That is a more demanding standard, but a more durable one, and it rewards firms that build conduct, governance and transformation into how they operate rather than how they report. The Bill is still moving through the process; the work of preparing for it is best started before it stops.