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Fraud, Corruption and Governance in pension funds: the legal framework

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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Fraud, Corruption and Governance in pension funds: the legal framework

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  1. Fraud, Corruption and Governance in pension funds: the legal framework SK

  2. 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”

  3. BASHALL AJ : FURTHER COMMENTS • 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

  4. WHAT HAS GOVT DONE ON ITS PART • 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

  5. WHAT ARE THESE LAWS • Pension Funds Act of 1956 • Financial Institutions Protection of Funds Act of 2001 • FSB Act of 1990 • FAIS Act of 2002

  6. WHAT DO THESE LAWS PROVIDE FOR • 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

  7. WHAT DO THESE LAWS PROVIDE FOR • 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

  8. REGULATOR’S POWER TO INTERVENE • Bad management (actual or likely) calls for FSB intervention • Registrar and FSB have wide powers in this regard

  9. WHAT IS FSB EMPOWERED TO DO? • Issue directives • Remove PO from office • Remove board from office • Remove administrator • Admin penalties

  10. WHAT IS FSB EMPOWERED TO DO? • 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

  11. WHAT IS FSB EMPOWERED TO DO? • 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

  12. WITH ALL THESE MEASURES IN PLACE, WHY 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)

  13. WHY ARE WE STILL GETTING IT WRONG? • Tough sanctions set out in legislation rarely imposed • Trustees and service providers often neglect their duties or pass the buck

  14. WHERE TO NEXT? WHAT MORE CAN BE DONE?

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