Edition: April / June 2016
FINANCIAL SERVICES BOARD 2
A step at a time
As the Hunter/FSB saga started to unfold, Alec Hogg’s Biznews website
(www.biznews.com) kept readers up-to-date with a series of columns
by TT editorial director Allan Greenblo. They’re republished below.
A full set of the papers filed by Rosemary Hunter is available by downloading,
from the Biznews website, the article it published on Jan 29.
Jan 29: Clean sweep
There’s no way that ‘Twin Peaks’ financial regulation
can be implemented as presently envisaged; no way,
that is, unless government is prepared to risk the
possible disaster of a crumbling peak. It has been
Restructure of the Reserve Bank, to take care of
prudential supervision, looks to be smooth sailing. But
for the Financial Services Board, due to be remoulded
as the authority over market conduct, the same cannot
This is because of the court application brought
by Rosemary Hunter, one of the FSB’s most senior
executives, against the FSB itself. Her demand for the
release of certain reports has set the scene for publicpolicy
outrage. Targeted allegations in her founding
affidavit, complemented by mountains of supporting
annexures, are too meticulous to be dismissed as the
ravings of a disaffected crank.
[See link to court application documents on
biznews.com article of Jan 29.]
The papers go to the heart of FSB governance. They
scream for National Treasury not willy-nilly to morph
FSB personnel into the market-conduct peak until
it has explored the FSB’s own market conduct under
executives and directors to be impartially vindicated or
At the least, senior FSB officials will need to be
scrutinised for competence and probity before their
contracts are extended for moves to the new authority.
Such is the gravity and stature of their positions that a
selection panel, similar to hearings before the Judicial
Service Commission, would help to stimulate public
confidence where it’s sorely needed.
By coincidence, the Hunter application is on the
cusp of ‘Twin Peaks’. It makes perfect the timing for a
clean sweep through the FSB.
Like the Securities & Exchange Commission in
the US, the SA regulator of market conduct can be
structured into an aspirational destination for the best
and the brightest of this country’s suitably qualified
job-seekers. Funded by levies on private-sector
savings, the FSB and its successor cannot be run as a public-sector bureaucracy.
Meanwhile, since the FSB must continue to
function, a few niggling questions:
- Why has the FSB integrated annual report, for the
year to end-March 2015, still not been published?
Are there any areas where the contents of
the report and the allegations of Hunter are
- Hunter has specifically fingered FSB executive
officer Dube Tshidi and FSB board chair Abel
Sithole (who happens also to be principal executive
officer of the Government Employees Pension
Fund). For delivery of the FSB’s statutory mandate,
can the three of them still be expected to work
together? If not, who should be suspended and
who in their stead should be offered acting
appointments? (Is former FSB chair Gill Marcus by
now sufficiently bored in her Knysna retirement to
ride to the rescue?)
- After the rand’s hammering, Finance Minister Pravin Gordhan is on a mission to restore
confidence and trust in the SA investment
environment. Cited in the Hunter application as a
respondent, because it’s to him that the regulator
of non-bank savings and investment institutions
reports, could he have wished for a more
straightforward test of his commitment?
Wish or no wish, Gordhan is immediately put to
Feb 4: Who’s the boss?
With his eyes open or closed, Finance Minister Pravin
Gordhan could find himself walking into a trap.
Created by default and certainly not by design, his
governance confrontation at the SA Revenue Service
can be replicated precisely at the envisaged Financial
Sector Conduct Authority.
It arises from the absence of a conclusive answer to
what should be a simple question: Who’s the boss?
The division is in lines of responsibility. They
become confused when the minister appoints a
commissioner who must in turn report to the minister,
but day-to-day operational duties rest with the
The contradiction would probably would have
escaped notice had it not been for the January
blow-up at SARS. When Gordhan called on
SARS commissioner Tom Moyane to stall the
implementation of a restructure, Moyane effectively
told Gordhan to take a hike.
The argument is that the commissioner, not
the minister, runs SARS. Reporting to the minister
on policy and performance is quite distinct from
the minister having a right to intervene in micromanagement
or even in strategic decisions.
Now check the Financial Sector Regulation Bill,
tabled in October and intended for enactment later
this year. In setting up the Financial Sector Conduct
Authority, the finance minister is to appoint the FSCA
commissioner “who will be responsible for the day-to-day
management and administration of the FSCA”.
In making the appointment, the minister and
commissioner must agree in writing “on the
performance measures that must be used to
assess (the commissioner’s) performance and
the level of performance to be achieved against
those measures”. That’s it, and rightly so. An
unwholesome situation would arise were the
commissioner’s performance rendered better or
worse by ministerial overrides.
But it leaves the minister exposed. With the FSCA,
unlike SARS, operational responsibility goes beyond a
domestic employer-employee arrangement. Ultimately
it is the minister, not the commissioner, who has to
provide the world with confidence in the conduct of
SA’s financial institutions. Should the commissioner
fall down on the job, the most the minister can do is
institute the processes of an independent inquiry to
Now shift the focus to current goings-on at
the Financial Services Board, being readied for
absorption into the FSCA. The allegations on affidavit by FSB deputy executive officer Rosemary
Hunter, against some of her most senior colleagues,
might not make it much easier for the minister to
appoint from present FSB ranks a commissioner and
up to four deputy commissioners “with appropriate
experience in the financial sector” as the legislation
Once the Hunter case is underway, with allegations
and counter-allegations to be cast hither and thither,
the personnel switchover from the FSB to the FSCA
could become more difficult still. And central to it,
reverting again to ministerial powers of intervention,
is why then finance minister Nhlanhla Nene had
sat silently on the sidelines once Hunter had given
him every opportunity and argument to push for a
In the FSB’s present incarnation, the minister
appoints an 11-member board. Sitting below
it is an eight-member executive committee. The
FSCA will change it to a commissioner structure,
the commissioner to chair an exco that “must
oversee the management and administration of the
FSCA to ensure that it is efficient and effective”.
Efficient and effective? Well, let’s see how efficient
and effective it will be once all FSB staff are transferred
(as per s285 of the Bill) to the FSCA. Or how top
people will emerge from the probity criteria once
Hunter has had her day in court. Or why the FSB
integrated annual report, for the year to end-March
2015, is still publicly unavailable.
Some things won’t change, like the power to raise
levies (from you and me) for funding of its operations.
There never has been accountability to levy-payers by
the FSB, and neither is there to be by the FSCA. Unlike
JSE-listed public companies, stakeholders have no say
on remuneration levels. It goes without question that
the FSB’s top executive be paid a multiple of top civil
Ah well, just a few more items for the plate of poor
Pravin. But importantly now, in moving the Twin
Peaks regulatory model to implementation, his recent
experience at SARS cannot blind him to potential risk
at the FSCA.
Feb 10: A loud silence
To put it benignly, there’s a “misunderstanding” on
when the annual report of a public body actually
becomes publicly available for public discussion. In
the case of the Financial Services Board, which reports
to Parliament through the Minister of Finance, there
should be no misunderstanding.
Evidently, however, there is. And the longer it
takes for the “misunderstanding” to be resolved, the
longer it will take before the report can be tested for
completeness and veracity.
The tests in this instance are whether, and if so
how, the FSB has reported to Parliament on the
grievances of deputy executive officer Rosemary
Hunter. Alternatively, if the report sidesteps the
grievances, is economical in revealing the status of
various legal and forensic inquiries, or otherwise fails
to deal with the “irregular expenditure” of which
Hunter complains, then what will Minister Pravin
Gordhan and the parliamentary Standing Committee
on Finance (SCoF) do about it?
Fireworks will be in order. The annual report of the
FSB, for its financial year to end-March 2015, is still
unavailable on the FSB website.
The timing looks to be running tight as already the
FSB is within weeks of reaching the end of its 2015-
16 financial year. This report will possibly be its last
before the FSB morphs into the new Financial Sector
There’s something distinctly odd in a process that allows the earlier report to be withheld from
perusal while preparations for the later report are
about to begin. Or perhaps not so odd, contends FSB
spokesperson Tembisa Marele: “The reason that the
FSB’s 2015 annual report has not yet been published
is purely procedural. We cannot publish it until it is
tabled in Parliament. We are waiting for Parliament’s
schedule to accommodate us.”
On the other hand, it’s particularly odd. David
Maynier, DA shadow finance minister and member
of SCoF, states: “I have confirmed that the FSB annual report for 2014-15 was tabled on 28 August
2015 in Parliament.”
Once tabled – which means simply that it has
been logged onto a parliamentary database and
given a case number – the document is public and
available to anybody capable of finding it. There’s
no constraint on the FSB to publish the report on
its website, or in any other manner that it wishes.
There’s no obligation either, except in so far as the
FSB wishes to be seen enhancing the principles of
transparency and accountability.
Pertinent to the FSB’s 2014-15 annual report is Hunter’s first “statement of non-compliance”
submitted to the FSB board in July 2014. It contains
her grievance against FSB executive officer Dube
Tshidi, arguing that Tshidi had engaged in a
“concerted campaign” to have her leave the FSB and had “sabotaged my ability to ensure that the
Retirement Funds Department properly fulfils its
In the course of these efforts, says Hunter, “Tshidi
has incurred expenditure for the FSB in substantial
amounts”. Thus the battle shifts up a gear to whether
there has been compliance with, or contravention of,
the Public Finance Management Act.
It’s reasonable to expect that the FSB annual
report, with integrity as its hallmark, will have
made the necessary disclosures. But on the offchance
that it hasn’t, the disclosures – and reasons
for non-disclosures – will have to be prised from
FSB officials when they appear for examination at
To have compiled and signed off the 2015 report,
on the assumption that Hunter wouldn’t go public,
might be exposed as one hell of a gamble.