Transcript Document

PIERRE REINECK
Employee Benefits Studio
Fund Governance: PF 130 in
Practice for Trustees
Fund Governance: PF 130
in Practice for Trustees
Background
These circulars constitute the Registrar’s
interpretation or requirements in respect of
various issues. Although the provisions set out
in these circulars are adhered to by the industry
they do not necessarily have any legal status as
such and are not enforceable in any formal
manner.
The Manual on South African Retirement Funds and other Employee Benefits 2007 page 463
Fund Governance: PF 130
in Practice for Trustees
Background
“The respondent [FSB] now alleges that the
[PF] circular is no more than a guideline for a
board and that a board is not bound thereby
and that it has a discretion to either apply it or
to ignore it.”
The Chairman of the Board of the Sanlam Pensioenfonds v The
Registrar of Pension Funds
Fund Governance: PF 130
in Practice for Trustees
Background
The King Commission was appointed in 1992 by the
Institute of Directors to make recommendations on
the financial aspects of corporate governance.
King Report on Corporate Governance was published
in November 1994. (King I)
1999 Banks Act amended to provide for compliance
officer function
Fund Governance: PF 130
in Practice for Trustees
Background
March 2002 King II Report on Corporate Governance
released
1 September 2003 compliance with King II Code a JSE
listing requirement
July 2007 Circular PF 130 issued by FSB
Fund Governance: PF 130
in Practice for Trustees
Background
King II Code : Application of Code
“The Code applies to the following business enterprises:
1.
All companies with securities listed on the JSE Securities
Exchange South Africa.
2.
Banks, financial and insurance entities as defined in the
various legislation regulating the South African financial
services sector.
…” In terms of the Financial Services Board Act
and the Financial Institutions (Protection of Funds) Act
3.
a pension fund is a financial institution
Circular PF 130
Governance by the Board
Governance by the Board of the
operations of the Fund
Management of Stakeholder
Relationships
Principle 1:
Roles, Responsibilities and
Accountabilities of the Board /
the Governance Structure
Principle 5:
Internal controls / governance
mechanisms
Principle 9:
Communication and Access
to information
Principle 2:
Composition and Competency
of the Board and delegation
through the use of subcommittees
Principle 6:
Expert Advisors
Principle 10:
Members and Beneficiaries
(protection of rights)
Principle 3:
Board Orientation and
Education
Principle 7:
Risk Management
Principle 11:
Employer and Sponsor
Principle 4:
Board Assessment and Breach
of Code of Conduct
Principle 8:
Investment Performance of
Fund Assets
Principle 12:
Approved Service Providers
Principle 13:
Regulatory Authorities /
Effective Supervision
Fund Governance: PF 130
in Practice for Trustees
Introduction
Compliance; Governance and Risk are not interchangeable
GOOD CORPORATE GOVERNANCE
Risk
Compliance
Governance
compliance ensures that components function harmoniously
Fund Governance: PF 130
in Practice for Trustees
Pension Funds Act Regulation 30(2) (u)
The rules of a pension fund shall … provide for the
following matters:
•
the policy of insurance effected to indemnify the
pension fund against losses owing to the
dishonesty or fraud of any of its officials or such
other indemnification as the Registrar may allow
48
How much Insurance does this house need?
or this one
Fund Governance: PF 130
in Practice for Trustees
You would walk through the house
Room by room
44
45 46 47
Making notes of the risks & possible losses 29
Adding up how much insurance would be need
Assessing and minimising risk
Considering cover and premium
71
Fund Governance: PF 130
in Practice for Trustees
In considering and assessing the risks facing the
Fund,
29
You would have in effect put together the basics
of a risk management plan
44
Fund Governance: PF 130
in Practice for Trustees
Further consideration ……..
If the fund was underinsured in a loss situation,
who would be liable for the shortfall on member
benefits?
Fund Governance: PF 130
in Practice for Trustees
7C.
Object of board
The object of a board shall be to direct, control and
oversee the operations of a fund in accordance with the
applicable laws and the rules of the fund.
HOW IS THE ‘direct, control and oversee ’ CURRENTLY
BEING ATTENDED TO BY THE TRUSTEES?
Fund Governance: PF 130
in Practice for Trustees
GOVERNANCE BY THE BOARD
13 - 34
GOVERNANCE BY THE BOARD OF THE
OPERATIONS OF THE FUND
35 - 55
Fund Governance: PF 130
in Practice for Trustees
7C.
Object of board
(2)(a)
take all reasonable steps to ensure that the interests of
members in terms of the rules of the fund and the
53
provisions of this Act are protected at all times,
(b)
act with due care, diligence and good faith; 2 16 20 66
(c)
avoid conflicts of interest;
(d)
act with impartiality in respect of all members and
beneficiaries.
20
19 23 38.4 69 74.4
Fund Governance: PF 130
in Practice for Trustees
7D.
Duties of board
(a)
ensure that proper registers, books and records of the
35
operations of the fund are kept, inclusive of proper minutes
of all resolutions passed by the board;
(b)
17.5
ensure that proper control systems are employed by or on
behalf of the board;
35 36 38 44 45 71
Fund Governance: PF 130
in Practice for Trustees
7D.
Duties of board
(c)
ensure that adequate and appropriate information is 11
communicated to the members of the fund informing them
of their rights, benefits and duties in terms of the rules of
the fund;
59 63
(d)
take all reasonable steps to ensure that contributions are
paid timeously to the fund in accordance with this Act; 35
(
Fund Governance: PF 130
in Practice for Trustees
7D.
Duties of board
(e)
obtain expert advice on matters where board members
may lack sufficient expertise;
(f)
8 10.4 30 31 39 40
42 48 50 69 75
ensure that the rules and the operation and administration
of the fund comply with this Act, the Financial Institutions
(Protection of Funds) Act, 2001 (Act No. 28 of 2001), and
all other applicable laws.
8 18.2 37 38.6
Fund Governance: PF 130
in Practice for Trustees
1. Trustees must recognise that a compliance and
governance function is necessary to identify, control
and manage fund risks.
2. To reduce fund and trustee liability exposure.
3. To improve fund management for the benefit of
stakeholders
4. Demonstrate that they are doing what the Act requires
they do
Fund Governance: PF 130
in Practice for Trustees
What should fund trustees be doing?
????????
Fund Governance: PF 130
in Practice for Trustees
Number of Members
and Pensioners
Number of Funds
Percentage of Total
1-20
7354
54,8
0,4
21-50
2019
15,1
0,8
51-100
1206
9,0
1,1
101-500
1829
13,6
5,0
501-1000
429
3,2
3,7
1001-5000
434
3,2
11,7
5001-10000
58
0,4
5,1
10001+
91
0,7
72,2
13420
100,0
100,0
By Funds
%
By Members
%
Codron FSB 032005
Fund Governance: PF 130
in Practice for Trustees
Commence with a risk management plan
Components
1. Risk management policy;
2. The identification of risks facing the fund;
3. The assessment of the impact of each such risk to the fund;
4. Examine the process or controls necessary to reduce the
impact of key risks;
Fund Governance: PF 130
in Practice for Trustees
Commence with a risk management plan
Cont…
5. The monitoring of the risk process or controls to ensure that
they are appropriate; and
6. The communication of the fund’s risk management policy to
stakeholders.
Fund Governance: PF 130
in Practice for Trustees
The development of trustee practise and fund
governance policies some suggestions;
• Implementation of compliance policy & charter
• Code of conduct
10.1
• Establish priorities
• investment policy statement
51
• socially responsible investment policy 51.3
• a communication policy
59
• performance assessment policy for trustees
10.4
33
Fund Governance: PF 130
in Practice for Trustees
Suggestions cont …..
• trustees education and training policy 10.4
• a risk management policy
44
• a policy about frequency and reporting by the
administrators and service providers
73
• policy on conflict of interest
74.4
• admin and benefits cost increase policy
• HIV strategy policy
Fund Governance: PF 130
in Practice for Trustees
Suggestions cont …..
• member investment training policy
63
• trustee discipline and dismissal policy
34
• round robin voting procedures policy
• trustee gift policy
• trustee remuneration / compensation policy
• subcommittee terms of reference
27
• proxy voting policy
51.7
Fund Governance: PF 130
in Practice for Trustees
Retirement Fund Committee
Terms of Reference
Content Template
Introduction and founding source
Objectives
Membership and Quorum
Secretary
Attendance at meetings
Reporting
Meetings and Proceedings
Authority
Duties of the Committee
Disclosure
Compliance with Legal and Regulatory Requirements
Internal Control
Ethics
Remuneration
Fund Governance: PF 130
in Practice for Trustees
PF 130 par. 12
Any annexure(s) added to this circular should be
regarded as providing guidelines for creating
appropriate policies and as flexible documents which
may be amended from time to time.
Fund Governance: PF 130
in Practice for Trustees
New demands on Trustees
More work and more costs
requires budgeting and planning
for phased implementation
Fund Governance: PF 130
in Practice for Trustees
What should fund trustees be doing?
Fit in or Fit out
Fund Governance: PF 130
in Practice for Trustees
“You cannot escape the responsibility of tomorrow
by evading it today”.
Abraham Lincoln
Fund Governance: PF 130
in Practice for Trustees
THANK YOU
Fund Governance: PF 130
in Practice for Trustees