Issue: Dec 2013 - Feb 2014
A way to go
Careful steps before PF130 can become law. Parts of it already are.
Long promised – or threatened? – is conversion from a guidance note to a legally-required directive of the Financial Services Board’s circular PF130 on the good governance of pension funds. The delay is not sinister.
First, it’s one thing to offer recommendations but quite another to compile a piece of law that can withstand court challenges. Second, what’s ultimately produced must be readily intelligible to ordinary trustees (who carry the can) and not primarily to their professional advisors (who don’t).
Whatever its other merits, in its present form PF130 is hardly the most user-friendly document for those lacking law degrees and the inclination to plough through its voluminous content. The overwhelming majority of trustees doubtless fall into the former category, and probably many into the latter as well.
So a desire for urgency is subordinated to a need for refinement. In any event, critical elements of the circular are already present in existing law (the Pension Funds and Financial Institutions acts); for example, that those in retirement funds’ positions of trust must avoid interest conflicts. Equally, providers of financial services are obliged “to avoid, and where this is not possible, to mitigate any conflict of interest”.
PF130 as a directive will have to prescribe requirements with which the boards of retirement funds must comply. These include specific measures, says Registrar Rosemary Hunter, to make it more difficult for trustees and service providers to use their powers in a manner “other than to advance the interests of the funds and their members”.
Bear in mind, too, that only parliament can make new law of a substantive nature. Also, she points out, the FSB is trying to ensure that its regulatory instruments are designed to take account of the different business models and circumstances of the various entities subject to regulation.
This is to ensure that the instruments are “fit for purpose”.
In the firing line
It’s happening on the fronts of two curatorships: First, there’s the R1,1bn claim by the curators of Corporate Money Managers who contend that Absa, as trustee of a cash-managed fund in the CMM portfolio, had failed in its duty of care (TT March-May ’13).
Latest word from the curators – Pieter Strydom, Graeme Polson and Louis Strydom – is that they’re confident of a “substantial financial recovery for investors”. However, with claims against two other lesser players also running and over 200 000 pages of documents to peruse, “it follows that the litigation concerned requires an enormous amount of preparation and will be costly”.
By late last year, the curators were still waiting for Absa’s attorneys to enrol their exception. Once it’s argued and out of the way, Absa will have to file its plea to the curators’ particulars of claim and then they in turn will have to reply to Absa’s plea.
Only then can the court be approached for a trial date. It’s not expected before late this year or early next.
Second is a claim for R195m plus interest by curators of the Trilinear Empowerment Trust. This relates to the whole debacle of investment of Trilinear entities in the now-liquidated Pinnacle Point property group (TT June-Aug ’13 and TT Sept-Nov ’12).
The TET curators – Andre Kriel, Themba Khumalo and Trevor Petersen – issued summons in February. They say that, by May 2009, Absa chief executive Maria Ramos had formed a “negative view” of further investment in Pinnacle and was prepared to write off the bank’s R931m investment in it. The bank was aware that, without additional funding, Pinnacle would be unable to continue as a going concern.
According to the summons, at all material times Absa had created the “reasonable impression” to TET that it would continue to support Pinnacle in the future. The bank had a detailed understanding of the Pinnacle business and operations.
Absa had allegedly failed in its legal duty to correct this impression. Had it done so, the curators say, TET would not have bought up to 48,4% of the shares in Pinnacle at a cost of R1,8bn. These shares are now worthless.
The summons describes TET as the investment vehicle of five provident funds established to benefit members of the SA Clothing & Textile Workers’ Union. TET is indebted to the five funds for R467m.
As the courts increasingly order that the reports of curators be published on the FSB website, so is more information gleaned on their inner workings.
There’s nothing spectacular in the progress report to November of Rockland group curator Pierre Kriel, except to note that “substantial responsibility” for development of the controversial Oakland City property development in the Western Cape has been “transferred”. Also, he’s attempting to sell some relative minor assets and recover others. While attempting to deal with civil claims arising from certain irregularities, he is not “at present” thinking about the institution of criminal proceedings.
Worth noting is that, after two years of curatorship (TT March-May ’13), Kriel’s fees inclusive of disbursements are little over R2m. Add such other expenses as legal and accounting assistance and the total cost of curatorship to date is R3,8m.
By comparison with some other curatorhips, it seems modest.
From the Adjudicator
Lukhaimane . . . withdrawals ruling
Hit by a slew of complaints to start the new year, the first complaint to be determined was from a member of the Corporate Selection Retirement Fund. He complained that he hadn’t received his withdrawal benefit when he left the fund and his employment because, he’d been told, he owed money to the employer.
In terms of the Pension Funds Act, noted Adjudicator Muvhango Lukhaimane, a fund may deduct any amount by a member to his employer for damage caused to the employer by the member’s “theft, dishonesty, fraud or misconduct”.
The complainant’s conduct fell into none of these categories. All he’d done was accept employment with another company, amounting to a breach of contract.
The fund therefore had to pay the complainant his full withdrawal benefit.
De Villiers . . . new business
Word on the street has it that Sanlam Employee Benefits was looking to buy retirement-fund administrator Aon SA, local subsidiary of the big UK group.
“Not so”, affirms SEB head Dawie de Villiers. “We were only appointed as administrator of the Aon umbrella fund after an extensive process. The appointment is just for the new Aon umbrella fund and not for the Dynam-ique fund.”
Aon SA has closed its administration business, affecting seven umbrella funds and 25 standalones.
Back to Dynam-ique
On it drags. Tony Kamionsky, owner and chief executive of Dynam-ique Consultants & Actuaries which formerly managed the IF umbrella funds, has sought leave to intervene as a respondent in the High Court appeal by the four former IF trustees against the Adjudicator’s determination that they pay for reconstruction of the funds’ databases. The rebuild could turn out ultimately to cost R20m but perhaps considerably less (TT Dec ’13-Feb ’14). Kamionsky contends that he is “in possession of material information relevant to the main application” by the former trustees. He also argues that he is a party to the complaint and that, if the appeal succeeds, the determination would be remitted back to the Adjudicator and reopened. Former trustees Gail le Grellier, Renier Botha, David Lepar and Carel Smith, are opposing Kamionsky’s application. They say that he was no longer involved with the funds when it was decided to commission the rebuild. In any event, the Adjudicator has already ruled that the settlement already concluded between Kamionsky and the funds gives her no further jurisdiction over him. So what’s his worry, should the Adjudicator have to reconsider?
Gould . . . beneficiariesí interest
As if they weren’t already a big enough problem, the Financial Services Laws General Amendment Act can make matters worse. The definition of unclaimed benefit now includes a benefit “not paid within 24 months from the date on which the fund became aware of the death of the member, or such longer period as may be reasonably justified by the board of the fund in writing”.
The effect, fears Giselle Gould of Fairheads Benefit Services, will allow trustees to give up the search for dependents after 24 months and pay the amounts into an unclaimed benefits fund: “Not all retirement funds have their own unclaimed benefits fund. This means the untraced benefit may go into an umbrella fund, in which case the beneficiaries are unlikely ever to be traced.”
Often, the tracing process can take much longer than 24 months. To protect vulnerable dependents, such as children needing to complete their education, she urges that trustees took to beneficiary funds rather than add to the mountain of unclaimed benefits.
Akani says no
Letjane . . . definitive approach
A member of the Municipal Employees Pension Fund has asked TT to check for him on a circular from Akani as administrator of the fund.
It looks to him, he says, that MEPF members contribute 7,5% of salary and the employer 22% i.e. for total contributions therefore to equal 29,5%. Yet, according to the circular, from April last year the withdrawal benefits for members will be only 11,25%; in other words, just 3,75% of the employer’s contribution vests for withdrawal benefits.
Is this interpretation correct? If so, what is the explanation for it? But if it isn’t correct, what interpretation is correct? TT asked Akani managing director Zamani Letjane to comment.
A reply was received from the Akani attorney: “All members of the MEPF must correspond directly with the trustees of the fund in respect of any query they may have. The MEPF cannot respond to its members’ queries through the media. In the circumstances, please request the member to direct his/her queries to the trustees of the MEPF. Our client undertakes to ensure that such query is dealt with expeditiously.”
All very well. But it doesn’t help members who, for some reason or other, fear being identified.
Press Council rules
The Ombudsman has directed that TT publish the following:
In our edition of March-May 2013 we incorrectly stated that Mr Zamani Letjane and Akani Retirement Fund Administrators had been under investigation in Swaziland. His attorneys pointed this out to us, and we duly published his views in a later edition.
However, Letjane lodged a complaint with the Press Ombudsman, arguing that this was not sufficient as it was incumbent upon us to not only publish his views, but indeed also to correct the record. He argued: “Instead of correcting the record, the Today’s Trustee rationalised why it had published the wrong facts in the first place.”
The Ombudsman, Johan Retief, remarked: “I take TT’s argument seriously that it did set out Letjane’s side of the story, and that it did not question the veracity of his statements. This is to be commended. The question, however, is if this was sufficient.
“I do not think so, as (a) the publication of Letjane’s view on this matter does not imply that the magazine has admitted that it made a mistake (as it should have); and (b) the lack of questioning the veracity of his statements is not equal to the acceptance of the truth thereof.”
He cautioned us for being in breach of s2.6 of the Press Code that states: “A person shall make amends for publishing information or comment that is found to be inaccurate by printing, promptly and with appropriate prominence, a retraction, correction or explanation.”
We hereby accept that we wrongly reported that Letjane and Akani Retirement Fund Administrators had been under investigation in Swaziland, and that we caused him unnecessary harm by this reportage. We regret this mistake.
Visit www.presscouncil.org.za for the full finding.