Fraud corruption and governance in pension funds the legal framework
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Fraud, Corruption and Governance in pension funds: the legal framework. SK. ABSA BANK LIMITED v SACCAWU NATIONAL PROVIDENT FUND. REMARK - BASHALL AJ “assets of pension funds, not infrequently viewed as a prize by commercial buccaneers, must be safeguarded”. BASHALL AJ : FURTHER COMMENTS.

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ABSA BANK LIMITED v SACCAWU NATIONAL PROVIDENT FUND framework

REMARK - BASHALL AJ

“assets of pension funds, not infrequently viewed as a prize by commercial buccaneers, must be safeguarded”


BASHALL AJ : FURTHER COMMENTS framework

  • Pension rules to be interpreted strictly

  • Pensioners vulnerable group

  • Interests of this group must be safeguarded

  • Pension fund assets are trust property

  • They deserve special protection


WHAT HAS GOVT DONE ON ITS PART framework

  • Passed laws to regulate funds

  • Appointed a regulatory body (FSB)

  • Given regulatory body wide powers

  • All these to reduce fraud and corruption and ensure good governance


WHAT ARE THESE LAWS framework

  • Pension Funds Act of 1956

  • Financial Institutions Protection of Funds Act of 2001

  • FSB Act of 1990

  • FAIS Act of 2002


WHAT DO THESE LAWS PROVIDE FOR framework

  • Fund owns assets in own name to exclusion of others

  • Board only managing organ to exclusion of others

  • Funds to have constitution/rules binding on everyone

  • Impose fiduciary and statutory duties on boards, PO’s and administrators and service providers


WHAT DO THESE LAWS PROVIDE FOR framework

  • PFA makes clear that good governance responsibility of board

  • FSB oversees and can interve where there’s failure by PO, BOARD and service providers

  • Board must therefore have policies in place to ensure good governance (PF 130, KING, UN, OECD principles)

  • Board must also implement policies


REGULATOR’S POWER TO INTERVENE framework

  • Bad management (actual or likely) calls for FSB intervention

  • Registrar and FSB have wide powers in this regard


WHAT IS FSB EMPOWERED TO DO? framework

  • Issue directives

  • Remove PO from office

  • Remove board from office

  • Remove administrator

  • Admin penalties


WHAT IS FSB EMPOWERED TO DO? framework

  • Impose fines or withdraw licences of service providers

  • Call on anyone to cease and desist from continuing with undesirable practices

  • Refer wrongdoers to enforcement committee

  • Apply to court to place institution under curatorship


WHAT IS FSB EMPOWERED TO DO? framework

  • Can cause an inspection or investigation to be carried out on fund or service provider

  • Take action against wrongdoers based on outcome of investigation

  • Report them even to SARS or NPA or professional bodies for further action to be taken


WITH ALL THESE MEASURES IN PLACE, WHY framework

ARE WE STILL GETTING IT WRONG?

  • There will always be people who bend or break laws

  • Current measures dont always allow for problem to be detected earlier

  • Usually we find out after the fact

  • Good policies (paper) dont necessarily ensure good governance (good people do)


WHY ARE WE STILL GETTING IT WRONG? framework

  • Tough sanctions set out in legislation rarely imposed

  • Trustees and service providers often neglect their duties or pass the buck


WHERE TO NEXT? WHAT frameworkMORE

CAN BE DONE?


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