Alexander Forbes tardy over refunds

12 YEARS ON: MANY STILL NOT COMPENSATED

While it’s understandable that paying compensation to members of funds that no longer exist is complicated, the delay of over a decade is troubling. Moneyweb

In July 2006, Alexander Forbes finalised a settlement with the then Financial Services Board (FSB) that it would pay back R364 million to pension funds under its administration. These refunds were payable because Alexander Forbes acknowledged that it had profited from bulking arrangements with banks, without informing the funds that it was doing so. In total, 1 825 pension funds were entitled to compensation. Members of hundreds of these funds are yet to be paid.

Cancelled funds

When the bulking settlement was reached in 2006, 297 of the funds owed refunds had already been cancelled. Nine more were cancelled in 2007.

The Financial Sector Conduct Authority (FSCA) (formerly the FSB) reveals that Alexander Forbes has still not paid the bulking refunds due to members of these 306 funds.

This issue was first raised in 2007 and Alexander Forbes entered into discussions with the FSB in 2008 on how to resolve the matter. The FSCA’s Olano Makhubela said: “Two options were considered – one which enabled Alexander Forbes to make direct payments to members entitled to such benefits subject to the supervision of the FSB, or for the registration of the funds to be reinstated to enable the funds to make such payments … these options are still being considered to ensure a cost-effective payment to members.

“Alexander Forbes has ring-fenced the related bulking proceeds in a separate account and the account is independently audited.”

Delays

While it’s understandable that paying compensation to members of funds that no longer exist is complicated, the delay of over a decade is troubling.

Alexander Forbes would only confirm that it has been “engaging with the FSB to ensure that former members of closed funds receive their share of the bulking settlements”.

“Alexander Forbes will not be making any application to have any funds reinstated,” group CEO Andrew A Darfoor stated. “The registrar is aware of all deregistered funds. Alexander Forbes remains committed, and is working with the FSB, to ensure that payments due are made to funds or their former members.

“This continues to be provided for in full on our balance sheet.”

It appears arrangements were made in 2008 for Alexander Forbes to compensate individuals who had already left funds that were paid refunds.

These members were compensated directly by Alexander Forbes. Its ability to pay individuals outside of pension funds was therefore established.