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Specialist Fields

RETIREMENT FUNDS LAW

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We assist businesses in all areas of Retirement Funds Law (Pension Fund, Provident Fund & Retirement Annuity Fund Law).

The Caveat Legal panel boasts extensive expertise in retirement fund matters, covering a spectrum of legal services essential for pension, provident, and retirement annuity funds (collectively referred to as retirement funds). This encompasses compliance and good governance, sustainability, investment & other commercial transactions, regulatory expertise, stakeholder protection, employee benefits, employment & labour law, transfers of assets & liabilities of members, rules and rule amendments, policy drafting and implementation advice, forensic investigations and tax, VAT and exchange control matters.

“Working to protect and support retirement funds, their stakeholders and service providers has been the biggest joy in my 23 year professional career. This is because in this line of work I get to use all my transactional and regulatory expertise in the financial sector to make a difference to South Africa and its people.”

- Arabella Bennett, Caveat Panel Member

Arabella Bennett

About our panel

Our specialised panel members offer sustainable, commercially-driven solutions tailored to the dynamic social, environmental and governance (ESG) landscape of South Africa. They have served and advised over a hundred private and public sector retirement funds, their participating employers, boards of trustees (including individual officers) and the vast array of service providers to retirement funds such as valuators, consulting actuaries, investment consultants, asset managers, forensic consultants and administrators and retirement fund stakeholders such as members, unions, chairpersons, principal officers, trustees, participating employers and beneficiaries.

Our panel members also have a track record of assisting local financial service providers in ensuring compliance in both South Africa and Namibia in relation to any financial sector product offering (involving, for example, asset management, prudential asset spread limitations (regulation 28), investment in derivative and insurance-related matters); running governance and fraud investigations; and assisting local and offshore corporates in addressing the retirement affairs for their South African or offshore employees.

What differentiates us

Our key differentiator is that our panel members have strong banking and finance expertise which gives them the commercial expertise and the transactional grit with which to advise their clients and manage regulatory and governance matters, be they advisory or transactional in nature. They also have an excellent reputation in the market for working closely and successfully with investment committees of retirement funds; other retirement fund advisors such as investment consultants; trade union interests; and with local and offshore financial and retirement fund authorities.

FAQs

Frequently asked questions on Competition Law

In response to the global financial crisis in 2008, the South African National Treasury on 23 February 2011 published a paper titled “A safer financial sector to serve South Africa better.” 

This paper was the beginning of South Africa adopting a financial system of governance akin to the United Kingdom’s “Twin Peaks” model. This policy treats the South African Reserve Bank as the macroprudential supervisor of governance via the establishment of the one “peak,” namely the Prudential Authority (the “PA”). The second “peak” has taken the form of the Financial Sector Conduct Authority (the “FSCA”), which obtained regulatory oversight of market conduct in the financial sector. 

The “Twin Peaks” model extends oversight over both private and public sector institutions, including private and public sector pension funds. On 14 May 2012 a further policy document was published by National Treasury titled “Strengthening retirement savings: an overview of proposals announced in the 2012 budget.” The latter contemplated a host of technical documents, many of which have come into effect since then. The agenda behind these documents was set out to include the following: reducing retirement fund costs, reform the annuities market, preservation and portability of retirement fund savings, harmonising retirement fund taxation, improving fund governance and the role of the trustee, regulating specific pension fund investments and extending pension laws to public funds. 

The key documents for pension fund governance are the rules of the relevant fund (the “Rules”) and the South African Pension Funds Act 24 of 1956 (the “PFA”). The Rules and the PFA are to be read together with the Financial Institutions (Protection of Funds) Act No. 28 of 2001 (the “Protection of Funds Act”). However a multitude of the proclamations by the old Financial Services Board (FSB) as well as the new(er) PA and the FSCA in the form of directives, board notices, information circulars (including Circular PF No. 130 (“PF130”), guidance notes and enforceable undertakings may be applicable. 

South African statutes such as the PFA and the Protection of Fund Act also need to be read in the context of decisions by the Pension Funds Adjudicator, the Financial Services Tribunal and applicable case law. Lastly, certain codes relating to good governance such as the King IV Report on Corporate Governance for South Africa, 2016 and the Code for Responsible Investing in South Africa are key frameworks for the proper governance of retirement funds.

Good pension fund governance requires a continuous and review of processes, policies, systems, and contracts for relevance, effectiveness and compliance by experienced retirement fund lawyers. Caveat Legal is able to assist to ensure that retirement funds have up to date governance processes and policies in place to ensure commercially astute regulatory compliance. Caveat Legal is also able to assist in matters where governance processes have failed or where forensic and/or legal investigation is required.

The fiduciary duties of trustees and other officers of a retirement fund are pivotal. Much has been written on the topic and every case needs to be evaluated based on the facts of the particular fund and/ or the conduct of the trustees and other officers in question. 

This write up is therefore not intended to be an exhaustive account of all the nuances pertaining to the fiduciary duties of boards of retirement funds. It is instead drafted to alert the reader to key factors that underpin the fiduciary duties which we regard as most often encountered in practice. 

Please note that the term “retirement fund” and “pension fund” are used interchangeably to refer to South African registered pension, provident and retirement annuity funds. 

Section 7C and 7D of the South African Pension Funds Act 24 of 1956 (the “PFA”) provide, respectively, for the object of the board of trustees and the duties of the board of trustees of pension funds. 

Sections 7C and 7D of the PFA are to be read together with the Financial Institutions (Protection of Funds) Act No. 28 of 2001 (the “Protection of Funds Act”), Circular PF No. 130 (“PF130”), the King IV Report on Corporate Governance for South Africa, 2016 (“King IV™”) and the Code for Responsible Investing in South Africa (“CRISA”).” The rules of the relevant retirement fund form the blueprint for the authority and duties of trustees of funds and adherence to the terms of such (in addition to statutory and regulatory documents) rules is key.

In terms of the object of the board of trustees of a pension fund, sections 7C(2)(b) and 7C(2)(f) of the PFA warrant a particular mention.  Section 7C(2)(b) requires that “[i]n pursuing its object the board shall act with due care, diligence and good faith.”  Section 7C(2)(f) in turn states that the board of trustees shall:

have a fiduciary duty to members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit, as well as a fiduciary duty to the fund, to ensure that the fund is financially sound and is responsibly managed and governed in accordance with the rules and this Act

Section 2 of the Protection of Funds Act deals with the duties of persons dealing with the funds of and the trust property controlled by financial institutions. Section 2(b) provides that a director or member of a financial institution who invests, holds, keeps in safe custody, controls, administers or alienates any funds of the financial institution or any trust property must, with regard to such funds, observe the utmost good faith and exercise proper care and diligence, refrain from alienating, investing, pledging, hypothecating or otherwise encumbering the assets of a fund in a manner calculated to gain directly or indirectly any improper advantage for any person other than the retirement fund, disclose any conflict of interest, and act in terms of the rules of a retirement fund.

The above is supported by PF130 which states at paragraph 2 that it is a fundamental principle that the board shall at all times act with the utmost good faith towards the fund and in the best interest of all members. In addition, principle 1 at paragraph 16 of PF130 provides that irrespective of whether board members are employer-appointed, member-elected, in the employment of the sponsor or independent board members, they: 

should endeavour to work together; 

should trust each other and also be worthy of trust in return; and 

owe a primary duty of care to the fund and the members and beneficiaries, and are not specifically accountable to or required to disclose any information to that group of persons or entities through whom they were appointed or elected as a board member. To this end the board should be sensitive to managing the diversity of the board effectively to ensure that any tension, fears, disagreements, influence, affiliations, special interest, etc. do not hinder decision making.” 

King IV™ under sector supplements, specifically principle 1, in turn provides that “[t]he board should lead ethically and effectively”. It is further provided that:

[e]thical and effective leadership is exemplified by integrity, competence, responsibility, accountability, fairness and transparency. Members of the board of the fund should individually and collectively cultivate these characteristics and exhibit them in their conduct as set out in the practices under Principle 1.

Trustees of retirement funds as well as other officers of retirement fund boards such as the principal officer and/or the chairperson of the fund can face joint and several liability. This means that they can be held liable as a group as well as in their personal capacities. The specific liability of a principal officer and/or the chairperson of a retirement fund are outside the scope of this question but Caveat Legal would be happy to address queries regarding this.

Section 10 of the Financial Institutions (Protection of Funds) Act No. 28 of 2001 (the “Protection of Funds Act”) provides for sanctions in relation to a person who fails to comply with chapter 1 of FIA (which includes section 2, quoted in the answer to the previous question). The Protection of Funds Act dictates that a person who contravenes or fails to comply with any provision of chapter 1 of this act is guilty of an offence and, on conviction, liable to a fine not exceeding R10 million or to imprisonment for a period not exceeding 10 years, or to both such fine and such imprisonment. 

Section 10(2) and (3) further provide for sanctions a court may impose which include an order which mandates a guilty person to pay over profits made and compensate the financial institution for any damages suffered. 

The court can in addition to the above, sanction such a guilty person by ordering that such person may not serve as a director, member, partner or manager of any financial institution for such period as the court may deem fit.

The above are serious sanctions and will have both personal as well as professional consequences on the person found guilty. 

Furthermore, there is case law in our jurisprudence which sanctions individual officers and trustees of boards of funds in their individual capacities for a variety of transgressions.

It is apparent from primary as well as secondary sources and soft law that the board of trustees owe a fiduciary duty to the fund and its members and must act with the utmost good faith in carrying out their duties. It is clear under FIA and case law that if a trustee breaches their fiduciary duty they may be sanctioned in their personal and professional capacity. It is also apparent that trustees are compelled to make disclosures and that protection is provided for trustees making such disclosures.

The answer below refers to disclosures that are relevant exclusively to the disclosures that are required to be made by a trustee of a retirement fund in the context of the regulatory framework pertaining to retirement funds. The law pertaining to criminal activity, anti-money laundering, cyber security, financial intelligence and reporting obligations to law enforcement are to be considered in tandem with the retirement fund framework in the event that such activities apply.

The South African Pension Funds Act 24 of 1956 (the “PFA”) compels trustees to disclose material matters relating to the affairs of the pension fund which, in the opinion of the board member, may seriously prejudice the financial viability of the fund or its members. The disclosing (or whistle-blowing) trustees are in turn protected by both the PFA and the Protected Disclosures Act 26 of 2000 (the “Protected Disclosures Act”).  

Section 1 of the PFA defines “disclosures” as follows:  

in addition to the meaning ascribed to “disclosure” in section 1 of the Protected Disclosures Act, includes the disclosure of information—

regarding any conduct of a pension fund, an administrator or a board member, principal officer, deputy principal officer, valuator, officer or employee of a pension fund or administrator, made by a board member, principal officer, deputy principal officer or valuator, or other officer or employee, of a pension fund or administrator; and

relating to the affairs of the pension fund which may prejudice the fund or its members;

Protected disclosure” is defined by the PFA as follows: “in addition to the meaning ascribed to “protected disclosure” in section 1 of the Protected Disclosures Act, includes disclosure of information to the registrar in terms of section 9B.” The registrar in this context is the Financial Sector Conduct Authority (the “FSCA”).

Section 9B of the PFA provides for protected disclosures. Section 9B(2) provides that “[i]n addition to what is provided in sections 8 and 9 of the Protected Disclosures Act, a disclosure by a board member, principal officer, deputy principal officer, valuator or other officer or employee of a fund or administrator to the registrar constitutes a protected disclosure.” Section 9B(3) provides for the protection and remedies available to any person who makes a protected disclosure. 

The Protected Disclosures Act also provides protection against civil and criminal liability (section 9A) and remedies (section  4). 

Lastly, section 7A(4)(b) of the PFA provides that:

A board member must on becoming aware of any material matter relating to the affairs of the pension fund which, in the opinion of the board member, may seriously prejudice the financial viability of the fund or its members, inform the registrar thereof in writing.

Our specialist members of the retirement fund panel at Caveat Legal assist clients in managing and reporting malfeasance or the risk thereof to the FSCA and other applicable law enforcement offices. Our experienced pension funds lawyers work closely with forensic experts to ensure the best outcome for our clients, be they participating employers of retirement funds, boards of trustees or individual officers of retirement funds.

“I love solving problems which is why I worked in the structured finance teams of law firms, banking groups and an insurance group for over 18 years.  My role on the Caveat Panel allows me to use my skills to solve problems for various types of entities and their stakeholders.”

- Lerato Serobe, Caveat Panel Member

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