FSCA PUBLISHES THE FINAL CONDUCT STANDARD FOR MINIMUM SKILLS AND TRAINING REQUIREMENTS FOR BOARD MEMBERS OF RETIREMENT FUNDS
On 10 July 2020, the Financial Sector Conduct Authority (FSCA) published the final Conduct Standard for minimum skills and training requirements for board members of pension funds, 2020 (Conduct Standard) along with supporting documents.
The background to the Conduct Standard is explained in the FSCA Communication 42 of 2020 as well as in the FSCA’s statement that was published in support of the Conduct Standard in terms of section 98(1) of the Financial Sector Regulation Act, 2017 (Statement).
Section 7A(3)(a) of the Pension Funds Act, 1956 (PFA) provides that ‘a board member appointed or elected in accordance with subsection (1), must attain such levels of skills and training as may be prescribed by the registrar … within six months from the date of the board member’s appointment’.
According to the Statement, board members often do not have the necessary and relevant retirement fund knowledge or expertise and may, therefore, be unable to perform their fiduciary duties or to contribute positively to the governance and management of the relevant fund to which they are appointed or elected. The Conduct Standard has therefore been created to prescribe the minimum skills and training requirements for board members of funds as provided for in section 7A(3) of the PFA.
Board members are required to attain the certification of the Trustee Training Toolkit (TTT) which is a facility provided for by the FSCA. Board members have six months from the period of appointment to the board to attain the certification.
To obtain the certification, board members must complete the required TTT tutorials, case studies, formative assessments and summative (final) assessment. The summative assessment must be completed under the supervision of the principal officer or chairperson of the board, who must ensure that the board member completes the assessment without assistance.
If it is found to be impractical for the principal officer or chairperson of the board to supervise the summative assessment, then a board member may complete the assessment without supervision. In this case, the board member will have to complete a declaration stating that the summative assessment was completed without supervision and provide the declaration to the FSCA on request.
The Conduct Standard became effective on 10 July 2020 (the effective date).
- Board members who were appointed before the effective date are deemed to have been appointed on the effective date and must attain the certification within six months of the effective date.
- Board members who attained the certification before the effective date will not be required to complete it again. Such board members must complete a declaration stating that they completed the TTT without assistance.
- If a person has attained the certification and is subsequently appointed as a board member of a fund, then that person is not required to complete the certification again.
Section 7A(3)(a) of the PFA is coached in obligatory terms i.e. board members ‘must’ attain the levels of skills as prescribed.
Non-compliance with section 7A(3)(a), and thus the Conduct Standard, may result in the FSCA removing a board member in terms of section 26 of the PFA, alternatively, the FSCA could issue a directive in terms of section 144 of the FSRA directing a board member to comply with the Conduct Standard or removing the board member from the board.
If a board member is unable to complete the TTT within the prescribed time, then he or she may apply to the FSCA requesting an extension of time to complete the TTT.
Many retirement funds in South Africa are umbrella (multi-employer) retirement funds and the rules of some umbrella retirement funds require that a participating employer establish a ‘management committee’ (commonly referred to as ‘MANCO’).
MANCOs usually consist of employer and member-elected representatives. Depending on the rules of the relevant umbrella fund, the board delegates certain of its duties and powers to MANCO.
Some of MANCO’s duties include the selection of risk benefits, fund contributions, investment portfolios and decisions relating to member investment choice. Interestingly, there are no similar minimum skills and training requirements for MANCO members despite them exercising several delegated functions.
The Conduct Standard and supporting documents, including the Statement, can be accessed here.