The Financial Sector Conduct Authority (FSCA) decision in 2022 to fine members of the board of trustees of Private Security Sector Provident Fund (PSSPF) has been vindicated.
In August the regulator imposed administrative penalties on several PSSPF trustees and removed others from its board for a string of suspect actions ranging from improper procurement practices to remunerating themselves for attending a golf day. Several of the sanctioned individuals applied to the Financial Services Tribunal (FST) for reconsideration but the FSCA’s decision was upheld in a decision on May 9.
“This ruling has far reaching implications for trustees and principal officers, as it confirms the powers of the FSCA to remove such officers from the boards of funds, as well as the feasibility of imposing penalties in the personal capacity of such representatives,” the FSCA said in a statement on Friday.
“The judgment reiterated the role and responsibilities of a principal officer and confirms the view of the FSCA that a principal officer holds a fiduciary responsibility towards the stakeholders in the fund. The Tribunal further agrees with our view that we can take action irrespective of the office you hold on other funds.”
The PSSPF, an umbrella provident fund established due to collective bargaining between trade unions and employer organisations in the private security sector, had been under scrutiny by the FSCA since at least 2017 when the authority uncovered a range of irregularities following an on-site inspection. A settlement was reached between the PSSPF and the FSCA that later led to certain board members resigning while an independent forensic investigation into the affairs of the PSSPF corroborated the FSCA’s initial findings, which uncovered issues including excessive and unjustified board expenses and improper procurement practices.
When the FSCA initially announced its regulatory action in August 2022 it took the unusual step of naming the sanctioned PSSPF trustees, with those slapped with administrative penalties being Zazi Zulu, Bonginkosi Qwabe, Simon Jackson, Hennie Myburgh and Sipho Miya. Board members who were removed in terms of the Pension Funds Act were Zithulise Mqadi, Marcel Coetzee, Anna Maoko and Jonnes Hlatshwayo. Cobus Bodenstein was removed from the board and slapped with an administrative penalty.
The FSCA also objected to the appointment of Peter Zibi as principal officer of the fund. However, in a series of rulings by the Tribunal all challenges to the FSCA’s August 2022 action were dismissed.
“This is an important and unprecedent decision for the retirement fund industry as it upholds the importance of good governance and prudent conduct by trustees and principal officers of retirement funds,” the FSCA said. “The FSCA expects both trustees and principal officers to comply with their fiduciary duties and to conduct themselves ethically, lawfully, diligently and properly.”
The FSCA also said that statutory management of the PSSPF had been terminated with effect from end-April 2023 following the successful discharge of the managers’ duties. An enforceable undertaking has also been entered into with the PSSPF, which will see more independent trustees on its board, the regulator added.
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