EPaper

Provident fund trustees sanctioned

• Board members paid themselves for attending golf day

Garth Theunissen Investment Writer theunisseng@businesslive.co.za

The Financial Sector Conduct Authority has imposed administrative penalties on several members of the board of trustees of Private Security Sector Provident Fund for a string of suspect actions ranging from improper procurement practices to remunerating themselves for attending a golf day.

The Financial Sector Conduct Authority (FSCA) has imposed administrative penalties on several members of the board of trustees of Private Security Sector Provident Fund (PSSPF) for a string of suspect actions ranging from improper procurement practices to remunerating themselves for attending a golf day.

Sanctioned board members who continue to serve on the PSSPF or other funds have been asked to vacate their positions within 10 days of receiving their sanctioning letters from the FSCA, while those who have already left the board have been slapped with fines ranging from R10,000 to R230,000 depending on their remuneration.

None of the implicated individuals can be debarred in terms of the Financial Sector Regulation Act, because their transactions occurred before the socalled Twin Peaks legislation was passed, while the Pensions Fund Act does not have a debarring provision.

UNUSUAL

The FSCA took the unusual step of identifying the sanctioned PSSPF trustees, with those given administrative penalties named as Zazi Zulu, Bonginkosi Qwabe, Simon Jackson, Hennie Myburg and Sipho Miya.

Board members who were removed in terms of the Pension Funds Act were Zithulise Mqadi, Marchel Coetzee, Anna Maoko and Jonnes Hlatswayo. Cobus Bodenstein was removed from the board and slapped with an administrative penalty.

The FSCA has also objected to the appointment of Peter Zibi as principal officer of the fund, and said the statutory manager appointed to oversee the affairs of PSSPF remains in place to ensure that members’ savings are protected.

“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,” FSCA commissioner Unathi Kamlana said in a statement late on Friday.

“Those trustees who do the right thing or make genuine mistakes without personally benefiting from them should not worry,” Kamlana said.

COMPLEX

After a long, complex investigation that began in 2017, the regulator said it had tracked down all the PSSPF board members “who could be traced” and gave them, with the assistance of their lawyers, an opportunity to respond to accusations levelled against them.

An independent forensic investigation conducted on behalf of PSSPF and the outcomes of an on-site inspection and an investigation by the FSCA led to a long list of findings against several of the implicated members of the board of trustees.

The FSCA found that the implicated trustees did not act in the interests of PSSPF members and failed in their fiduciary duty to ensure cost-effective procurement and sound utilisation of fund resources.

Among the reasons for these findings are that the board deviated from its own procurement policy by appointing service providers without any justifiable basis and entering into tender negotiations with these providers after already concluding the tender process in violation of regulations.

The rates paid to board members during the 2017 financial period were also found to be inconsistent with PSSPF trustee remuneration policy. That the chairs of each of the fund’s subcommittee received a fixed monthly fee in addition to their fee for attending meetings is an unusual practice in the retirement funds industry.

Most bizarre of all is that board members were remunerated for attending a golf day and a conference.

“The FSCA considers the transgressions and improper conduct 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 Pension Funds Act,” the regulator said.

“The fine seeks to send the right message that improper conduct will have consequences, irrespective of whether a member has left the board.”

The PSSPF, an umbrella provident fund established due to collective bargaining between trade unions and employer organisations in the private security sector, had 598,611 members and held assets to the value of R10bn at the end of February 2021.

The fund is administered by SALT Employee Benefits, a company in which 3Sixty Global Solutions Group — itself a subsidiary of the investment arm of the National Union of Metalworkers of SA (Numsa) — acquired a 74.9% stake in 2019.

OLD STORY

Khandani Msibi, the CEO of 3Sixty Global Solutions Group, told Business Day the group had sold SALT Employee Benefits in June to its previous owners Salt Invest.

“This is an old story and happened before we bought SALT,” Msibi said of the regulatory action against certain members of the PSSPF board of trustees.

The PSSPF has been under scrutiny by the FSCA since at least 2017, when the authority conducted an on-site inspection that uncovered issues including excessive and unjustified board expenses and improper appointment of service providers, prompting an application for the fund to be placed under curatorship in 2018.

A settlement was reached between the PSSPF and the FSCA that was later made a court order, and led to certain board members resigning.

Two statutory managers were appointed who commissioned an independent forensic investigation into the affairs of the PSSPF, a process that corroborated the FSCA’s initial findings.

The regulator said it does not rule out further regulatory action against other parties once its processes have been concluded.

WE ARE COMMITTED TO PROTECTING MEMBERS OF RETIREMENT FUNDS AGAINST RECKLESS OR INTENTIONAL CONDUCT

THE FINE SEEKS TO SEND THE MESSAGE THAT IMPROPER CONDUCT WILL HAVE CONSEQUENCES, [EVEN IF] A MEMBER HAS LEFT THE BOARD

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2022-08-10T07:00:00.0000000Z

2022-08-10T07:00:00.0000000Z

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