A slurry of financial services companies, big and small, have been fined over the past three months by the Enforcement Committee of the Financial Services Board (FSB), the board’s administrative justice arm, for failing to maintain levels of liquid assets required in terms of the Pension Funds Act.
Jurgen Boyd, the FSB’s deputy executive in charge of retirement funds, says the licensing conditions of pension fund administrators include requirements that they hold current assets that are sufficient to cover their current liabilities and that they have liquid assets that can fund their operating expenses for two months.
The reason for the reserves is to ensure that they can deliver the services they are contracted to provide to retirement funds and ultimately the retirement fund members.
Boyd says FSB inspectors, in an inspection blitz, have found a number of administrators to be non-compliant.
He says reasons for non-compliance include the following:
* Pension fund administrators hold liquid assets in unacceptable financial instruments and not, as required, in current and/or savings accounts with a bank or mutual bank in South Africa;
* Some administrators unacceptably rely on the financial backing of holding companies – usually in terms of a “letter of financial support”;
* Administrators do not have the required current assets and/or the required level of liquid assets; and
* Some administrators are simply ignorant of their obligations to hold liquid assets while some confuse their obligations under other laws with those required under the Pension Funds Act, which is separate and distinct, imposing different obligations.
The latest companies to be fined by the Enforcement Committee for contravening the Pension Funds Act for failing to maintain liquid assets equal or greater than eight weeks’ worth of their annual operating expenditure are:
* Prescient Investment Management, which was fined R19 300;
* LifeSense Financial Services Administration, which was fined R10 000;
* RF Administrators, which was fined R22 299;
* Grant Thornton Capital, which was fined R23 756; and
* Maxim Employee Benefits, which was fined R14 230.
In other recent FSB Enforcement Committee activity:
* Sanlam Developing Markets was ined R100 000 and Safrican Insurance Company Limited was fined R60 000 for contravening the Financial Advisory and Intermediary Services (FAIS) Act in that both institutions conducted business with Gertel Algemene Handelaars, trading as Multi Brokers, which was not an authorised financial services provider.
* Zimkhita Jamjam was fined R25 000 for contravening regulations of 2003, prescribed in terms of FAIS Act, in that from November 30, 2010 to August 31 this year she canvassed for, marketed and/or advertised the rendering of financial services by a foreign-based company, FXPRO Financial Services. FXPRO Financial Services was not an authorised financial services provider nor was it lawfully appointed as a representative of an authorised financial services provider.
* EMQ Training Solutions CC was fined R25 000 for contravening regulations prescribed in the FAIS Act, in that from March 17, 2009 to August 31 this year EMQ canvassed for, marketed and/or advertised the rendering of financial services by a foreign-based company, AVA Financial. AVA Financial was not an authorised financial services provider nor was it a lawfully appointed representative of an authorised financial services provider.
* Qmulate, trading as Mianzo Asset Management, was fined R10 350 for contravening the Pension Funds Act by administering investments on behalf of a pension fund during the period from December 2010 to April this year without the approval of the registrar.