COFI Readiness Series | Week 3

COFI Licence and Remuneration Model: How COFI Could Affect Your FSP

Licensing, activity mapping, conduct risk, and incentive structures

COFI is not only about better processes. It may also affect how your business is licensed, how activities are classified and supervised, and whether your remuneration model supports fair customer outcomes.

COFI licence and remuneration model changes are already worth preparing for

COFI licence and remuneration model changes may not be final yet, but the regulatory direction is already clear. Businesses that start mapping their real activity footprint and their remuneration-related conduct risks now will be in a much stronger position than those that wait for implementation pressure.

In Week 1, we looked at the shift from paper compliance to customer outcomes. In Week 2, we looked at whether your business can show how compliance works in practice. This week, we move to a broader business question: could the way your FSP is licensed, structured, and rewarded create future COFI risk?

The key issue is no longer only what category of FSP you are. The real question is what activities your business actually performs in practice, who performs them, and whether those activities are supervised, controlled, and evidenced.

Why COFI licence and remuneration model planning matters for FSPs

The draft COFI direction points toward a more unified, activity-based conduct model. As a result, businesses will increasingly need to understand what activities they perform, which products those activities relate to, which clients they serve, who performs the work, and how the work is controlled.

That means the future question is not only, “What category of FSP are we?” Instead, it is also, “What activities do we actually carry on in practice, and are those activities clearly allocated, supervised, and evidenced?”

If your business model looks simple on paper but more complex in practice, this is the time to identify that gap.

What the COFI licence and remuneration model could mean for licensing

The draft COFI approach points to one market conduct licence from the FSCA, with different authorisations depending on the activities being performed. In addition, the policy direction suggests that authorisation may be linked not only to activities, but in some cases to particular financial products and categories of financial customers.

In practical terms, that means a business may need to think more carefully about its real operating model, not just its existing licence label.

What businesses should start mapping now

Providing or issuing a product: Where the institution acts as the provider, issuer, or product manufacturer.

Distribution, advice, and discretionary investment management: A key area for many FSPs and intermediaries.

Intermediation and customer-facing servicing: Including onboarding, document collection, servicing changes, replacements, and transactional support.

Investment administration: Including administration of investments or pooled investments.

Safeguarding or custody functions: Including holding assets or trustee-type responsibilities.

Payment services: A separate regulated activity area under the draft structure.

Financial markets activities: Such as underwriting, dealing, market-making, and clearing-type functions.

Some credit-related services: Including certain debt collection functions linked to credit agreements over time.

Map your real business model, not only your licence label

For many FSPs, the real COFI issue is not whether they recognise the draft activity labels. The real issue is whether they understand the full range of activities that take place in the business every day.

For example, an FSP may describe its business mainly as giving advice. However, in practice it may also assist clients with claims submissions, servicing amendments, underwriting requirements, complaints handling, and post-sale support. Under a more activity-based conduct model, those practical services matter because they shape how the client experiences the business.

Therefore, this week’s exercise is not about legal theory alone. It is about mapping your actual business model honestly and in enough detail to support future readiness.

What the COFI licence and remuneration model could mean for remuneration

The draft direction makes it clear that remuneration is a conduct issue, not only a payroll issue. Payment for an activity or service should be reasonably commensurate with the actual activity or service performed. In addition, businesses should avoid rewarding the same activity more than once, and they should avoid structuring incentives in ways that increase the risk of unfair customer outcomes.

This means FSPs should start reviewing commission structures, targets, bonuses, and broader incentive models through a conduct lens.

Question	Why it matters
Are people paid for the actual service they perform?	Payment should align with real work, not only assumptions or legacy structures.
Could two parties be rewarded for effectively the same activity?	Duplicate reward structures may create unnecessary conduct risk.
Do incentives focus too heavily on volume, speed, or sales?	Pressure on output alone can encourage rushed advice or weak disclosure.
Do performance measures include quality and fair outcomes?	Suitability, disclosure, persistency, complaints, and outcomes should matter too.
Could the current model encourage poor behaviour?	Even long-standing models can create conduct risk in practice.

How to review your COFI licence and remuneration model this week

Choose one area of your business and work through the following questions.

Part A: Activity and licensing map

What activities do we actually perform in practice?
Which products do those activities relate to?
Which client types do we serve?
Who performs each activity?
Who supervises each activity?
What evidence shows that the activity is controlled?

Part B: Remuneration and incentive review

How is each relevant person paid or incentivised?
What behaviour does that payment model encourage?
Is remuneration linked only to output, or also to quality and fair outcomes?
Could any part of the model create conduct risk?
What management information would show whether this risk is already appearing?

Start early, because structure and incentives shape outcomes

COFI has not yet replaced the current framework. Even so, the regulatory direction already shows why early preparation matters. Businesses that start reviewing their activity footprint, supervision model, and remuneration structure now will be better prepared than those that delay until final implementation pressure builds.

If you need support, you can also explore our compliance consulting, licensing and registration services, and compliance training. You can also monitor conduct-related developments through the FSCA and broader policy material published by National Treasury.

This Week’s Practical Focus

Use this week to test whether your business understands its real activity footprint and whether its remuneration structure supports fair outcomes.

First, map what the business actually does. Next, identify who performs and supervises each activity. Then, review whether payment structures encourage the right behaviour.

Focus areas for Week 3

Activity mapping Licence readiness Supervision Incentive risk Fair outcomes

This gives your business a more realistic picture of where future COFI risk may arise.

Warning signs to watch for

The business describes itself too narrowly.
Post-sale activities are not mapped properly.
Supervision is informal or inconsistent.
Targets reward volume more than quality.
Management reporting does not show conduct risk clearly.

How Nkwali helps

At Nkwali Compliance Consultants, we help FSPs assess how their real operating model, oversight structure, and incentive arrangements may create conduct risk under an evolving COFI framework.

We help businesses map activities properly, strengthen supervision, and review whether remuneration structures align with fair customer outcomes.

Need help reviewing your licence and remuneration model?

We can help you map business activities, identify conduct risks, and review whether your current structure is likely to support COFI readiness.

Email us Call 031 100 0988

How COFI Could Affect Your Licence and Remuneration Model