FSB hits flat note for pension party
● The music has come to an abrupt end for freeloading pension-fund trustees, who for years have been wined and dined at the annual Cape Town International Jazz Festival by fund administrators.
The Financial Services Board has warned pension-fund administrators including Momentum, Old Mutual, Sanlam and Liberty that they will be in breach of new regulations if they host trustees at the event this weekend.
FSB pension-funds registrar Dube Tshidi issued a directive on March 8 forbidding the giving or receiving of gifts. This caps the value of gifts from asset managers for the principal officers, board members or trustees of funds at R500 a year.
A draft of the directive, aimed at cracking down on corruption in the industry, was first issued in November last year for
public comment.
Insiders said companies had previously splurged millions of rands on entertaining trustees of pension funds with their spouses at the popular annual event. This included putting them up in five-star hotels, buying them meals at top restaurants and plying them with wine and spirits.
The Sunday Times has seen an e-mail from FSB investigators to some companies requesting information about trustees invited to the jazz festival.
“Our office will institute fitness and propriety inquiries into those individuals involved. We therefore recommend that you urgently inform trustees involved that the invitation is cancelled due to communication received from FSB,” the e-mail reads.
In the e-mail the FSB also asks for a list of all trustees attending the festival, as well as the names of the retirement funds on which they serve and the costs involved for travel and accommodation.
Well-placed sources said the FSB clampdown had led to some companies losing millions as they had to cancel luxury-hotel bookings and other arrangements.
“It’s a standard industry practice that we entertain trustees as our clients at the jazz festival. All the companies go all out and it has been happening for years where people bring their partners to enjoy free food, jazz and all sorts of entertainment,” said an insider who wanted to remain anonymous.
He said some of the companies had previously spent close to R10-million during the festival on travel, accommodation and entertainment.
Some of Sanlam’s VIP guests were booked into the five star Westin hotel, where rooms start at about R5 000 a night. Sources said some of the expenditure could prove wasteful as several guests did not show up and rooms had already been paid for.
Deputy registrar of pension funds Olano Makhubela said the directive had “not necessarily” been initiated by information relating to the jazz festival.
“The directive is part of the FSB’s ongoing and enhanced supervisory approach to ensure retirement funds are properly managed and governed, and that trustees are not unduly influenced,” he said.
“The aim of this directive is to prescribe conditions to combat and prevent potential corrupt activities,” he said, noting that gifts could be seen as attempted bribes.
“Such excessive influence and conduct could impair trustees’ ability to objectively assess service providers and the true value they offer to retirement funds.
“A trustee has a fiduciary duty to the fund, its members and beneficiaries.
“This means certain interactions with service providers, including entertainment . . . can compromise the trustees and therefore should be avoided.”
Momentum, which looks after 744000 retirement-fund members whose assets amount to more than R206-billion, said it had retracted its invitations to trustees.
“After receiving the notification [from the FSB] we retracted any invitations sent to trustees,” said Momentum spokesman Mandy Laemmle.
Old Mutual said it had not invited any officers of retirement funds. “As a responsible business, it is our duty to adhere to all regulatory requirements set out by the FSB and other institutions. We have already made the necessary arrangements to ensure we comply with the requirements of this regulation and have engaged with our staff in this regard,” said Old Mutual spokesman Clement Chinana.
Sanlam spokeswoman Caroline Dibakoane said that by the time the FSB notice arrived, the company had already issued invitations.
“Sanlam informed affected invitees of the FSB’s position and such invitees were able to attend at their own discretion,” said Dibakoane, describing the Cape Town jazz event as an opportunity for networking and discussion.
On Thursday, the FSB issued a clarification that companies which had already committed themselves and could not withdraw their invitations did not need to do so, but the FSB would not endorse their actions.