Financial Services Laws General Amendment Bill Presentation

1. PRESENTATION BY THE LOA TO THE PORTFOLIO COMMITTEE ON FINANCE • 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 • There are some changes in the Bill that was tabled so a few of our written comments are no longer applicable

2. 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”…

3. 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?

4. 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.

5. 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.

6. 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.

7. 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.

8. 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” .

9. 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.

10. PROBLEMS WITH THE PROPOSED SECTION 37 (D) • WORDING AND PROCESS – require review • 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.

11. 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.

12. 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.

13. THANK YOU - ANY QUESTIONS? • Contact details: • Anna Rosenberg • The Life Offices’ Association of South Africa • Deputy Executive: Legal & Policy  • (021) 421 2586 • anna@loa.co.za • Sagie Nadasen • Legal Adviser - Sanlam •      (021) 947 3684 • sagie.nadasen@sanlam.co.za • Rod Stevenson   • Legal Adviser- Old Mutual • (021) 509 4708 • rstevenson@oldmutual.com