Specifically this will prevent asset managers from using gifts as a means of soliciting business, and pension fund principal officers, board members or trustees from receiving any material gift. The directive (No. 8: Prohibition on the Acceptance of Gratification, March 08, 2018) appears to limit any gift or gratuity to no more than a token amount of R500 per year from any party.
This directive brings legislation governing the pension funds industry more in line with that governing financial services providers, which falls under the Financial Advisory and Intermediary Services (Fais) Act.
Back in 2010 the Fais Act issued a directive that applied a R1000 limit on gratuities given or received. It applied specifically to financial service providers, but many industry participants chose to interpret it as also applying to pension fund trustees. Inevitably though regulatory gaps are open to exploitation and this appears to be the gap the Registrar seeks to close.
The new directive makes it clear that all fiduciaries in the service of retirement funds – from the principal officer to employees of administrators to future service providers – are now subject to a gratuity limit. That limit appears to be R500 per year from any one party. Further the registrar has made the definition of “gratification” sufficiently wide and inclusive so as to prohibit the giving of any material gift.
“This directive is part of the regulator’s drive to set clearer and more consistent rules to improve governance in our industry,” says Ryan Kieser, who is head of Compliance at Futuregrowth, which manages pension fund monies, among other investments. “It does so by re-emphasising and strengthening the fiduciary role each stakeholder must play in protecting the pensions and life savings of all the citizens in our country.”
The registrar has gone a step further and directed that anyone who becomes aware of a possible transgression has a duty to report it. “This means that you cannot stick your head in the sand and pretend you did not see something. It makes it risky to offer a gift, or ask for one,” says Kieser.
Another positive step is that the directive specifically carves out an exception to allow retirement fund trustees and board members to be remunerated for their service by the sponsor of a retirement scheme. Currently they are often not paid for the work they do for the fund
The directive disallows service providers from paying for trustee education progams. “Trustee financial education is beneficial”, says Keiser, “so the directive may serve to encourage retirement funds to allocate the necessary budgets to provide training for trustees for their service.” But, he goes on, “we think it may be beneficial to allow service providers to provide or subsidise bona-fide, third-party, educational programs for retirement fund trustees to improve and support their fit and proper status,” says Kieser. “But such future exception, should be only for education, and be subject to appropriately constrained value limits.”
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