Treating Customers Fairly (TCF) in South Africa: What Financial Services Providers Must Do

Treating Customers Fairly (“TCF”) has become one of the central regulatory principles governing South Africa’s financial services industry. The Financial Sector Conduct Authority (“FSCA”) increasingly expects Financial Services Providers (“FSPs”), key individuals and financial advisers to demonstrate that fair customer outcomes are embedded throughout their businesses, not merely reflected in policy documents.

In practice, many South African FSPs underestimate the extent to which TCF affects:

• governance

• product design

• advice processes

• complaints handling

• disclosure obligations

• incentive structures

• representative supervision

• compliance frameworks

The FSCA’s approach to TCF has also become increasingly relevant in:

• FSCA investigations

• enforcement proceedings

• debarment matters

• fit and proper assessments

• conduct risk reviews

• compliance inspections

Importantly, TCF is not merely a theoretical compliance principle. Poor customer outcomes can expose an FSP to significant legal, regulatory and reputational risk.

At Barter McKellar, our banking and financial regulatory lawyers advise:

• Financial Services Providers

• key individuals

• compliance officers

• financial advisers

• fintech businesses

• insurers and intermediaries

on TCF compliance, FSCA investigations, governance obligations and financial services regulatory risk across South Africa.

In this article, we explain:

• what Treating Customers Fairly means in practice

• the FSCA’s expectations regarding TCF

• the six TCF outcomes

• how TCF affects FSP governance and advice processes

• common TCF compliance failures

• how FSPs can reduce regulatory risk

What Is Treating Customers Fairly (TCF)?

Treating Customers Fairly is a regulatory framework developed by the FSCA to ensure that customers of financial institutions are treated fairly throughout the entire product and service lifecycle.

TCF forms part of South Africa’s broader conduct regulation framework and is closely linked to:

• FAIS

• conduct standards

• governance obligations

• fit and proper requirements

• customer protection principles

• the emerging Conduct of Financial Institutions (“COFI”) framework

The FSCA expects TCF to be embedded within the culture, governance and operational conduct of FSPs operating in South Africa.

Importantly, TCF is outcomes-focused. This means the FSCA is generally more concerned with the actual outcomes experienced by customers than with whether an FSP merely has formal compliance policies in place.

The Six Treating Customers Fairly Outcomes

The TCF framework is built around six customer fairness outcomes that financial institutions are expected to achieve.

Outcome 1: Customers Must Be Confident They Are Dealing With Fair Institutions

The FSCA expects FSPs to demonstrate that fair treatment of customers is central to the culture of the business. This includes:

• ethical leadership

• governance oversight

• compliance culture

• proper supervision of representatives

• fair conduct standards

TCF is therefore not solely a compliance function, it is also a governance issue.

Outcome 2: Products Must Be Designed for Appropriate Customer Groups

Financial products should be designed to meet the needs of identified customer groups.

The FSCA increasingly scrutinises:

• inappropriate product targeting

• unsuitable customer segmentation

• complex products sold to vulnerable customers

• misaligned distribution strategies

This is particularly important for:

• investment products

• insurance products

• retirement products

• fintech offerings

• alternative investment structures

Outcome 3: Customers Must Receive Clear Information

Customers should receive clear, accurate and understandable information before, during and after contracting.

The FSCA frequently reviews:

• disclosure documents

• marketing material

• advice records

• product explanations

• fee disclosures

• risk warnings

Poor disclosure practices may expose FSPs to regulatory scrutiny and complaints.

Outcome 4: Advice Must Be Suitable

One of the most important TCF obligations relates to the suitability of financial advice.

Financial advisers and representatives are expected to:

• properly assess customer needs

• understand customer risk profiles

• explain product risks

• maintain adequate records of advice

• avoid conflicted recommendations

Many FSCA investigations and FAIS complaints arise from allegations involving unsuitable advice.

Outcome 5: Products Must Perform as Customers Were Led to Expect

Customers should receive products and services that perform consistently with the expectations created during the sales process.

The FSCA may scrutinise:

• misleading sales practices

• unrealistic return expectations

• undisclosed limitations

• inappropriate representations

• conflicted remuneration structures

This is particularly relevant in investment and insurance disputes.

Outcome 6: Customers Must Not Face Unreasonable Post-Sale Barriers

Customers should not encounter unfair barriers when:

• changing products

• lodging complaints

• making claims

• cancelling services

• accessing information

The FSCA increasingly focuses on complaint-handling processes and customer remediation frameworks during regulatory inspections.

Why TCF Matters for South African FSPs

Many South African FSPs incorrectly treat TCF as a standalone compliance exercise. In reality, TCF affects almost every aspect of an FSP’s operations.

The FSCA increasingly considers TCF principles during:

• compliance inspections

• governance reviews

• licence applications

• fit and proper assessments

• enforcement proceedings

• debarment disputes

• representative supervision reviews

Weak TCF frameworks may expose FSPs to:

• regulatory investigations

• reputational damage

• enforcement action

• customer complaints

• Ombud proceedings

• governance findings

Common TCF Compliance Failures

Many TCF-related regulatory issues arise because FSPs fail to operationalise fairness principles within their businesses.

Common failures include the following.

“Tick-Box” Compliance Approaches

Some FSPs implement TCF policies without meaningfully integrating fairness principles into operational decision-making.

The FSCA generally expects evidence of:

• practical implementation

• active monitoring

• governance oversight

• customer outcome analysis

rather than merely documented policies.

Poor Representative Supervision

Inadequate supervision of representatives frequently leads to:

• unsuitable advice

• disclosure failures

• complaints

• customer prejudice

FSPs remain responsible for ensuring that representatives comply with both FAIS and TCF obligations.

Misaligned Incentive Structures

Aggressive sales incentives may create conflicts between:

• revenue generation

• customer interests

• suitable advice obligations

The FSCA increasingly scrutinises remuneration models that may encourage poor customer outcomes.

Inadequate Complaint Handling

Poor complaint management processes often indicate broader governance and TCF weaknesses.

The FSCA expects complaints to be:

• properly investigated

• fairly resolved

• monitored for systemic risks

• escalated where necessary

Weak Governance Oversight

TCF failures frequently arise where:

• boards are disengaged

• key individuals fail to exercise oversight

• compliance frameworks are ineffective

• conduct risks are not properly monitored

Governance failures can materially increase regulatory exposure.

TCF and FSCA Investigations

The FSCA frequently assesses TCF compliance during:

• onsite inspections

• governance reviews

• enforcement investigations

• thematic reviews

• conduct risk assessments

In many regulatory matters, the FSCA examines whether customer outcomes were genuinely fair in practice.

Even where technical FAIS compliance exists, poor customer outcomes may still attract regulatory criticism.

TCF and the Future of Conduct Regulation in South Africa

TCF principles are expected to play an even greater role under South Africa’s evolving conduct regulation framework, including the anticipated Conduct of Financial Institutions (“COFI”) legislation.

South African financial institutions are increasingly expected to:

• embed customer fairness into governance structures

• improve conduct risk management

• strengthen product oversight

• enhance complaints management

• monitor customer outcomes proactively

FSPs that fail to adapt may face increasing regulatory scrutiny.

How FSPs Can Reduce TCF Regulatory Risk

South African FSPs should take proactive steps to ensure that TCF principles are embedded throughout their operations.

Important risk mitigation measures may include:

• strengthening governance oversight

• improving representative supervision

• reviewing incentive structures

• enhancing complaints management

• conducting conduct risk assessments

• reviewing disclosure practices

• monitoring customer outcomes

• implementing effective compliance systems

TCF should form part of the overall governance and risk management framework of the business.

Speak to a Financial Services Regulatory Lawyer

At Barter McKellar, our banking and financial services regulatory lawyers advise clients across South Africa on:

• Treating Customers Fairly (TCF) compliance

• FSCA investigations

• governance and conduct risk

• FAIS compliance

• representative supervision

• compliance frameworks

• Financial Services Tribunal proceedings

• regulatory enforcement matters

We assist:

• Financial Services Providers

• key individuals

• compliance officers

• financial advisers

• fintech businesses

• insurers and intermediaries

with complex financial services regulatory and governance matters under South African law.

If your business requires assistance with TCF compliance, governance obligations or regulatory investigations, contact our team for confidential legal advice.

Frequently Asked Questions About Treating Customers Fairly (TCF)

What does Treating Customers Fairly mean in South Africa?

Treating Customers Fairly is a regulatory framework requiring financial institutions to deliver fair customer outcomes throughout the product and service lifecycle.

Is TCF mandatory for FSPs?

Yes. The FSCA expects South African FSPs to incorporate TCF principles into their governance, compliance and operational frameworks.

Can the FSCA investigate TCF failures?

Yes. The FSCA frequently reviews TCF compliance during inspections, investigations and enforcement proceedings.

How does TCF affect financial advisers?

TCF affects advice suitability, disclosure obligations, record-keeping and customer communication practices.

What are the risks of poor TCF compliance?

Poor TCF compliance may expose FSPs to regulatory investigations, customer complaints, reputational damage and enforcement action.

Does TCF apply to fintech businesses?

Yes. Fintech businesses providing regulated financial services in South Africa may also be subject to TCF obligations and FSCA conduct expectations.