Edition: April / June 2016
FINANCIAL SERVICES BOARD 1
Hunter and hunted
Massive litigation getting set to commence.
Allegations fly, and counter-allegations sure to fly,
about the regulator of retirement funds.
It’s taken a while for the project of the Financial Services Board, to cancel the registrations of
“dormant” retirement funds, to blow up (TT Sept-
Nov ’15). It’s since exploded into something much
Rosemary Hunter, deputy executive officer of the
FSB and head of its Retirement Funds Division (RFD),
recently launched a mandamus application in the
North Gauteng High Court. Basically, a mandamus
application is one where a court order is sought for
a public authority to perform a specific act that it is
required by law to perform.
Hunter wants the FSB to make available to her the
reports of retired Concourt judge Kate O’Regan and
of accountancy firm KPMG into the cancellations
project. Respondents are the FSB itself, FSB chairman
Abel Sithole, FSB executive officer Dube Tshidi,
former RFD head Jurgen Boyd and Finance Minister
Pravin Gordhan (as the minister to whom the FSB
They’ve indicated that they intend to defend the
action. It will doubtless take them time to prepare
responses to the screeds of legal arguments and
documents, with all their revelations about internal
workings of the FSB, that Hunter has filed in support
of her application.
Litigation of this magnitude is unlikely to be heard,
let alone be decided, before Hunter’s employment
contract expires at end-July. Moot is whether the
finance minister will then renew it, either for the FSB
or the market-conduct authority to take its place.
The more that litigation proceeds from the North
Gauteng court to higher courts, the more exorbitant
the expense. Hunter might be comforted by a 2009
Concourt decision that, in testing a constitutional
principle, an unsuccessful litigant in proceedings
against state officials should not be ordered to pay
Thus, even if the respondents succeed, it’s possible
that the FSB (substantially funded by levies on
retirement funds) could be liable for the costs of all
parties. If so, wait to see what provision will be made
in the next (and probably last) set of FSB accounts.
Hunter’s papers are replete with allegations that
the FSB had incurred irregular expenditure and had
contravened the Public Finance Management Act as
well as the FSB Act. There’s much more hard-hitting
stuff: about the seizing of her computer and subjecting
her to a forensic investigation; instituting a disciplinary
inquiry where the charges were quickly dropped during
cross-examination by her counsel; the offer of a golden
handshake, and a failure by the FSB board to respond to her non-compliance notices (NCNs).
The first NCN was submitted to the FSB board
in July 2014 and the second in June 2015. Detailed
allegations include how:
- Tshidi had engaged in a “concerted campaign” to
have her dismissed from the FSB “possibly in
order” to prevent her from investigating the
manner in which RFD staff had dealt prior to her
arrival with the governance, disposal of assets
and liabilities, and cancellation of registrations of
thousands of dormant funds. He’d also sought to
protect certain underperforming staff in the RFD;
- To achieve this objective, Tshidi had “sabotaged” her ability to ensure that the RFD properly
performed its mandate by, amongst other things, seeking to frustrate investigation of the cancellations project and preventing approval of the necessary budget to upskill the RFD;
- He’d also sought to persuade her to resign by making “numerous false and defamatory allegations” against her; publicly undermining her reputation, and encouraging members of the FSB executive committee “to view me with
suspicion” and to address her in a “hostile manner
probably with a view to finding support for an allegation” that her relationship with colleagues was irretrievably broken.
The big questions are whether, and if so how, the
FSB board responded to Hunter’s grievances. It goes to
the heart of FSB governance. Yet little is revealed in the
2015 integrated annual report.
The annual report was unavailable until an
enterprising journalist, Carol Paton of Business Day,
tracked down a copy in a storeroom at parliament.
This was in February, prior to presentation of the
report to parliament’s Standing Committee on Finance
(SCoF). The FSB then published the report on its
website and simultaneously put out a press release
which itself is instructive for the FSB’s approach.
Paragraph by paragraph, with TT comments inserted at each, it said:
FSB:The Public Finance Management Act
(PFMA) requires all public entities to submit their
annual reports to parliament through the Finance
Minister at the end of August every year. The FSB
has been complying with this requirement since it
published its first report in 1991. The practice since
then has always been for FSB executives to present
the Annual Report (AR) to parliament’s SCoF
before the report is published on the FSB website.
This is a common practice for many public entities.
The FSB had no reason to deviate from this 24-year
old practice when preparing the 2014-15 AR.
TT comment:There was reason to deviate, and no obligation not to deviate. The report was for the year to end-March 2015. We were now into February
2016, almost a year later when the FSB was already
approaching the end of its next financial year.
Public officials are required to act in a manner that
is effective, transparent and accountable. For the AR
to have been withheld from the public domain for so
long hardly promotes these standards. According to
parliament’ own rules, documents that have been tabled
and referred to the relevant committee (as the 2015 AR
had been) are public documents. There was therefore
nothing to have prevented the FSB from making it public
at a much earlier stage.
The report was tabled in parliament on
28 August 2015, in accordance with statutory
requirements and within the specified timeframe.
The FSB was scheduled to give its presentation
to the SCoF on 22 September 2015, but this was
rescheduled for 14 October 2015. This date was also
cancelled. Public entities can only present reports to
the SCoF on invitation. This is how the committee
works. Our executives have since been waiting for
an invitation to present the report, in line with the
The FSB’s long-standing practice undermines the
ability of parliament to hold it accountable. Had the
AR been published on the FSB website at the same
time or shortly after it had been tabled in parliament,
any person (including the media) concerned about
what was or wasn’t in it could have brought it to the
attention of a SCoF member who could then ask FSB
representatives about it when they appeared before the
committee. And it would have helped to guide SCoF on
which FSB representatives to invite. The FSB approach is
disempowering of SCoF.
In the particular Hunter instance, prompt
publication on the FSB website may well have caused
questions to be asked by the public and media about
cryptic references in the AR to the cancellations
project. Quite possibly, SCoF would have attached such
importance to these questions as to have moved the
FSB presentation up its agenda. Maybe, were Hunter
invited to appear before SCoF, it would have averted the litigation now being pursued.
On the other hand, maybe it suited the FSB for
SCoF’s attention to be delayed until the matter was
overtaken by other events. The expiry of Hunter’s FSB
contract and the dissolution of the FSB board on the
establishment of the Financial Sector Conduct Authority
come to mind.
On page 71 of the 2014-15 AR, the Chairman
of the FSB Board has made full disclosures of
investigations into the cancellation of dormant
pension funds between 2007 and 2013. The
disclosures indicate that the outcomes of these
investigations are expected in the 2015-2016 report.
Furthermore, on page 30 of the AR an update is
given on the status of the cancellations.
Not so. First, the disclosure on page 71 was not
made by the FSB chairman. It was made by the Auditor
General and contained in his report on the FSB audit.
Also in this report the Auditor General stated at page 70
of the FSB annual report:
“The FSB has commissioned an investigation to
establish whether any pension fund or its members had
suffered financial prejudice as a result of the action by
the registrar to cancel the registration of dormant or
other inactive pension funds during the period between
1 January 2007 and 31 December 2013....The outcome
of this investigation is expected in the 2015-16 financial
Second, even if this statement had been made by
the FSB chairman, is cannot be said to resemble “full
disclosure”. For example, it does not disclose that the
FSB had been advised by Andrew Breitenbach SC that
key elements of the Registrar’s conduct, in relation to
the cancellations project, were ultra vires his powers. In
these circumstances, according to Breitenbach, the FSB
was obliged by law to investigate whether any of these
funds and/or their members had been prejudiced.
What followed were a report by Justice O’Regan and,
on her recommendation, an investigation by KPMG on
a sample of funds. The contents of neither the O’Regan
report nor of the KPMG investigation have been
disclosed. It delays the triggering of processes for redress of prejudice that affected funds and members might
Third, all that’s said at page 30 of the AR – under the
heading “significant (retirement-fund) industry-related
issues – is a bland statement about the FSB having
obtained legal advice and consulted with the retirementfunds
industry on measures to improve the governance,
disposal of assets and liabilities, and cancellations of the
registration of orphan funds etc. There is no update on
the status of the cancellations project.
The report of the Auditor General was signed on July
31 2015. By then, according to Hunter, the FSB board
had copies of both the O’Regan and KPMG reports.
The FSB adheres to the highest standards
of corporate governance, with no tolerance for
corruption or any wrongdoings. Allegations of
any breach of the PFMA are therefore without
foundation and are strongly rejected. As a public
entity, the FSB is stringently monitored. Every year
the Auditor General conducts a comprehensive audit
of our financial and non-financial performance and
the FSB has received unqualified audits for the past
Ok then, but it leaves a chasm between what
the FSB says about itself and what Hunter says in
her founding affidavit about matters in her noncompliance
notices not being investigated by the
board. She also suspects that misinformation to the
Auditor General had caused him not to investigate
her allegations of irregular expenditure during the
2014-15 financial year.
The battle is joined for the courts, eventually, to
have the last word. Then, and only then, can it be
assessed whether Hunter is a public-interest heroine or
a mischief-making villain.