After a five-year-long investigation, the Financial Sector Conduct Authority (FSCA) has found that the board of trustees of the provident fund representing the security industry in South Africa, the Private Security Sector Provident Fund (PSSPF), contravened various financial sector laws and regulations and failed to act in the best interests of the fund’s members.
In a statement released on Friday, the FSCA says the investigation and various actions commenced in 2017, and all the members of the board who could be traced were given an extensive opportunity to respond to the various assertions and allegations levelled at them.
The following findings were made:
• The board of the PSSPF deviated from its own procurement policy and processes in the appointment of service providers, without any justifiable basis;
• Agreements in respect of the appointment of service providers were inconsistent with service providers’ tender proposals;
• Tender negotiations with service providers took place after conclusion of the tender process, in violation of applicable regulations;
• The rates paid to board members during the 2017 financial period were higher and inconsistent with the PSSPF’s Trustee Remuneration Policy;
• Board members attended a Golf Day and a Conference, and they were remunerated for attending the events; and
• Chairpersons of each sub-committee received a fixed monthly fee in addition to their fee for attendance of meetings, which is not standard practice in the retirement funds industry.
The FSCA concluded that the board members:
• Failed to take all reasonable steps to ensure that the interests of members, in terms of section 7C of the Pension Funds Act, (PFA) were always protected;
• Failed in their fiduciary duty of acting with due care, diligence and good faith, by failing to ensure that the procurement of service providers was done in a cost-effective manner; and
• Failed to ensure that the resources of the PSSPF were utilised in a sound and cost-effective manner, which constituted a breach of the board’s duties in terms of the PFA and the Financial Institutions (Protection of Funds) Act, 2001.
Regulatory action
The FSCA says it considers these transgressions serious enough to warrant appropriate regulatory action, which includes the imposition of administrative penalties on individuals and the removal of board members in terms of the PFA.The FSCA has also objected to the appointment of the Principal Officer. The relevant board members, listed below, have since been served with the letters in this regard and have also been informed of their right to apply to the Financial Services Tribunal to reconsider the FSCA’s decisions:
• Zazi Zulu – administrative penalty.
• Bonginkosi Qwabe – administrative penalty.
• Simon Jackson – administrative penalty.
• Hennie Myburg – administrative penalty.
• Sipho Miya – administrative penalty.
• Cobus Bodenstein – removal in terms of the PFA and an administrative penalty.
• Zithulise Mqadi – removal in terms of the PFA.
• Marchel Coetzee – removal in terms of the PFA.
• Anna Maoko – removal in terms of the PFA.
• Jonnes Hlatswayo – removal in terms of the PFA.
• Peter Zibi (Principal Officer) – objection to (continued) appointment in terms of the PFA.
Members’ interests
The FSCA says in its statement that the duties of a board in managing pension funds include ensuring compliance with the laws and rules governing pension funds and ensuring that pension funds’ assets are not abused. “The improper management of pension funds can cause significant financial prejudice for the funds and its members, ultimately compromising their benefits at retirement and resulting in old-age poverty,” the authority says.
“The FSCA recognises those board fund members who conduct themselves ethically, lawfully, diligently and properly, and maintain an open and cooperative relationship with the FSCA. While the Authority accepts that the complexity of overseeing retirement funds could at times result in genuine mistakes by trustees, certain conduct which can be construed as deliberate or grossly reckless, self-enriching, and an abuse of position with ulterior motives or malicious intent, will be sanctioned.”
The statutory manager appointed to oversee the affairs of the PSSPF remains in place “to ensure that members’ savings are protected at all times”.
The FSCA says that, given the complexity of this matter, it does not rule out further regulatory action on other parties once other processes are concluded.
FSCA Commissioner Unathi Kamlana said: “We remain committed to protecting members of retirement funds against any reckless or intentional conduct by trustees which could compromise retirees’ savings, and we will take action where justified. Those trustees who do the right thing or make genuine mistakes without personally benefiting from them should not worry”.
What is the PSSPF?
The Private Security Sector Provident Fund is an umbrella provident fund registered in terms of the Pension Funds Act. It is currently administered by SALT Employee Benefits and was established as a result of collective bargaining between trade unions and employer organisations in the private security sector.
All private security firms are required to enrol specified categories of employees (security guards) as members of the PSSPF unless exempted from this obligation.
PERSONAL FINANCE