Financial Services Laws General Amendment Bill

• Would like to highlight key points arising from our written submission.

• There are some changes in the Bill that was tabled so a few of our written comments are no longer applicable

PRESENTATION BY THE LOA TO THE PORTFOLIO COMMITTEE ON

FINANCE

AMENDMENTS TO THE FSB ACT

APPEAL PROVISIONS

• Appeal against decision of decision - maker (s26)- It appears that the FAIS-Ombudsman falls within the definition of a decision maker

• The appeal process is different to the process under FAIS – must be aligned

• Section 26(2) reads “an appeal must be lodged within 30 days of the person becoming aware of….a decision…….

• Reasons should also be provided with the decision and the section should say…”a decision and the reasons therefore”…

AMENDMENTS TO THE FINANCIAL INSTITUTIONS (PROTECTION OF FUNDS)

ACT

• Support better enforcement provisions.

• Some concerns around the framework for the enforcement committee.

• Panel must be independent and impartial – one must guard against institutional bias.

• Right to legal representation, chairperson may allow legal representation? – s6(C)

• Burden of proof (balance of probabilities/) & type of sanctions

• Penalties – no maximum?

AMENDMENTS TO THE FINANCIAL INSTITUTIONS (PROTECTION OF FUNDS)

ACT

• Section 6D (4) – why does criminal charge mean no enforcement action?

• Costs of the panel and expenses incurred by the applicant may have to be paid by the respondent – s6(D)(6)?

• Section 6F(2) says that the launching of appeal proceedings does not suspend the operation or execution of a determination…..unless the chairperson directs otherwise.

• Submit execution should be suspended unless the court decides otherwise on good cause shown.

AMENDMENTS TO THE FAIS ACT

INSPECTIONS AND ON-SITE VISITS

• Who can conduct on-site visit.

• Registrar should have reasonable grounds to suspect non-compliance.

• Access only to documents relative to the reasons for the inspection/investigation.

• S4(6) –gives the Registrar unfettered discretion without any guidelines or limitations- no requirement for prior consultation with the provider or representative or to provide a copy of the report.

AMENDMENTS TO THE FAIS ACT

• s(7)(3)– have given suggested wording to make the section clear.

• Should be extended to product providers who are not FSP’s –insurers have this requirement in PPR.

• Appears that is also necessary to check that the FSP is licensed in the correct product category. This will require extensive systems work and time is needed.

• Requirement to notify of company changes other than key individual questioned.

AMENDMENTS TO THE FAIS ACT

• S14 -Debarment – provision that debarment should follow for “contravention of any provision of FAIS is too wide.

• If necessary to expand to include serious non-compliance under the Act, this should be dealt with by expanding the fit and proper requirements.

AMENDMENTS TO THE FAIS ACT

• S14A – welcome extension of debarment powers to the registrar.

• However grounds for debarment too wide (as with s14).

• S33(a) – should specify the maximum amount of any “punitive penalty” .

PENSION FUNDS ACT

TREATMENT OF PENSION INTEREST ON DIVORCE

• Section 37(D) – provides for the immediate payment of the pension interest of a member of a pension fund assigned to the non member spouse in terms of a divorce order (clean-break principle) and that this should also apply to divorce orders granted prior to 13 September 2007.

• We support the clean-break principle, but are concerned about a number of matters arising from the proposed amendment.

PROBLEMS WITH THE PROPOSED SECTION 37 (D)

EFFECT ON VESTED RIGHTS

• Divorce settlements before 13 September 2007 involving pension interests, may have have taken into account that the non-member’s share of the pension interest would only be paid out to him/her at a future date.

• Need process for member (e.g. to approach the High Court) to prove that it would be unfair and inequitable for retrospective application to apply in his/her particular case.

WORDING AND PROCESS – require review

PROBLEMS WITH THE PROPOSED SECTION 37 (D)

EFFECT ON FUNDS

• Investment strategies effected and assets might have to be disadvantageously realised if funds receive large number of requests at around the same time.

ADMINISTRATIVE COSTS

• Requests will have to be processed manually and will be costly for funds.

PROBLEMS WITH THE PROPOSED SECTION 37 (D)

EFFECT ON PENSION INTEREST OF THE NON-MEMBER SPOUSE

• Support aim of the clean break principle to see to it that the non member shares in the growth of his/her benefit post the divorce.

• However now the non-member can get immediate access and not use the money for retirement funding.

• This is likely to lead to a substantial leakage in retirement provision for the spouses in question.

• Proposal –pension interest of the non member spouse to remain in the retirement fund in question & will receive the same growth as that of the member.

THANK YOU - ANY QUESTIONS?

  Contact details:

• Anna Rosenberg The Life Offices’ Association of South AfricaDeputy Executive: Legal & Policy 

(021) 421 2586 anna@loa.co.za

• Sagie NadasenLegal Adviser - Sanlam

     (021) 947 3684 sagie.nadasen@sanlam.co.za

• Rod Stevenson  Legal Adviser- Old Mutual(021) 509 4708

rstevenson@oldmutual.com