COVID-19: FCSA’S EXPECTATIONS OF REGULATED ENTITIES – SOUTH AFRICA
The Financial Sector Conduct Authority (FSCA) published ‘FSCA Communication 12 of 2020 (General) – Supervision’ (Communication) on 30 March, acknowledging the impact of the COVID-19 global pandemic on financial institutions and their customers, and outlining its key expectations regarding the culture and responsibilities of financial institutions during the crisis.
The FSCA emphasised that ‘regulated entities should bear in mind the current circumstances and assist their customers with even more empathy, flexibility and understanding during these difficult times’. Treating customers fairly remains paramount.
The Communication applies to all financial institutions, including insurers, banks, financial services providers, retirement funds, retirement fund benefit administrators and collective investment scheme managers.
In relation to insurers (see section 3), the FSCA advised, amongst other things, that:
- changes to current insurance products or the launch of new products related to the needs or risks identified in the market due to the impact of the COVID-19, must continue to follow the prescribed process as stated in the Policyholder Protection Rules;
- exclusions that are impacted by COVID-19 must be clearly communicated to policyholders and potential policyholders as soon as the impact has been identified by the insurer;
- delays in settling of claims must be avoided, in particular in relation to funeral claims. Where delays cannot be avoided, time delays must be clearly and pro-actively communicated to customers.
In relation to banks (see section 4.1 and 4.2), the FSCA advised, amongst other things, that it ‘is paramount that South Africans continue to trust the banking system, and that access to the payment and banking system is secure’. Where bank branches are closed, the FSCA’s expectation is that banks communicate alternative banking venues and channels to customers, as well as clear guidance regarding closures and any alternative venues and channels.
In relation to advisors and intermediary services providers (FSPs) (see section 4.3), the FSCA emphasised that advice to customers during the pandemic is very important and that advisors play a key role in assisting customers in understanding the market and the impact of COVID-19 on investments, savings products and insurance.
In relation to investment managers (see section 6), the FSCA advised that the ‘asset managers and CIS managers must appropriately manage liquidity risks that COVID-19 brings to the portfolios while enabling investments that can benefit investors and the wider economy’.
The FSCA expects that the boards of management of retirement funds keep abreast of risks that COVID-19 brings to retirement funds and to take steps necessary to mitigate risks. Boards are also encouraged to communicate COVID-19 related developments and risk management strategies to fund members and to minimise the risk of premature withdrawal of benefits (see section 5.1). As far as it relates to retirement fund benefit administrators, the FSCA expects administrators to keep funds and members as well as third parties informed of any changes to the administrators’ processes and procedures (see section 5.2).