BHF360° | DECEMBER 2020
L E G A L P E R S P E C TIV ES
The Medical Schemes Industry and the
2 DRAFT OF THE COFI BILL ND
By Debbie Pearmain, BA LLB LLD LEGAL CONSULTANT, BHF
T
he second draft of the Conduct of Financial Institutions Bill (COFI Bill) was published by the National Treasury for public comment on 29 September 2020. In a notice accompanying the Bill, Treasury stated that references to medical schemes and medical scheme administrators have been removed from the revised draft Bill pending the conclusion of the work of a task team between Treasury, the Council for Medical Schemes the Prudential Authority and the Financial Sector Conduct Authority (FSCA). The question for schemes is whether, if they are subsequently included by the task team, there will be a later opportunity for them to comment on the revised Bill. Scrutiny of the second draft reveals that medical schemes and administrators are still included under certain sections. This is because the Bill uses
the terms ‘financial product’, ‘financial service’ and ‘financial institution’ as defined in the Financial Sector Regulation Act (FSRA). Medical schemes and administrators satisfy these definitions. Although the COFI Bill proposes extensive amendments to the FSRA, they do not affect the definitions of these terms. This means that whenever the COFI Bill refers to a ‘financial institution’, medical schemes and administrators are included. Schedule 1 lists the activities that must be licensed by the FSCA. Medical schemes are expressly excluded. Under the activity ‘providing a financial product’ there is a note stating that ‘medical schemes are not subject to the COFI Bill pending the outcome of policy engagement between DOH and NT’. However this is more of a drafting note than a provision of the Bill itself. Also it appears only in Schedule 1, which deals specifically with licensing. It does not appear in the main body of the Bill. This means simply that schemes are not required to be licensed under the Bill.
The COFI Bill is a key pillar in the government’s Twin Peaks financial sector regulatory reform process that aims to entrench better financial customer outcomes in the South African financial sector.
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