Standard Bank Group Retirement Fund v Registrar of Pension Funds

Transcription

1 COMMENT ON ADV. FAIZEL ISMAIL S PAPER ON SECTION 33A OF THE PENSION FUNDS ACT, PRESENTED AT THE 2008 ANNUAL CONFERENCE OF THE PENSION LAWYERS ASSOCIATION Dear Mr Greenblo We refer to Adv. Faizel Ismail s paper on section 33A of the Pension Funds Act, which was presented at the recent conference of the Pension Lawyers Association and on which you have requested comment from the Registrar of Pension Funds ( the Registrar ). The Registrar would like to advise as follows: 1. We are concerned that Adv. Ismail s paper has created the perception in the retirement fund industry that section 33A affords the Registrar unfettered powers and scope of discretion without any guidance as to how such powers are to be exercised. In effect Adv. Ismail has presented a worst case scenario in which these seemingly unbridled powers will be exercised irresponsibly, irrationally and capriciously by the Registrar with no or little regard to administrative justice and constitutional constraints. As will be illustrated later, nothing can be further from the truth. In our opinion, Adv. Ismail has presented a rather exaggerated and perhaps over-simplified view of how section 33A is supposedly going to be implemented by the Registrar which, with respect, is mostly speculative and hypothetical. It must further be borne in mind that Adv. Ismail has merely presented an opinion nothing more and nothing less. 2. Adv. Ismail asserts that section 33A of the Pension Funds Act ( the PFA ) has been introduced to provide a statutory basis and legislative stamp of approval to what were otherwise non-binding PF circulars issued by the Registrar so as to facilitate the implementation of the PFA. While this may very well be true, there is in fact a much broader historical context to the introduction of section 33A. The recent spate of governance failures and cases of blatant non-compliance with the PFA, which have been widely reported in the commercial press and some of which have culminated in criminal prosecution and urgent applications for curatorship, have shown that if the Registrar is to discharge his mandate of regulating all registered pension funds effectively and expeditiously in the interest of members and to generally act in the public interest, he would require wider and far-reaching powers.

2 2 This was to ensure that if an inspection or investigation into the affairs of a pension fund, administrator or third party reveals endemic non-compliance with the PFA, which could result in substantial financial loss to the fund, the Registrar would be in a position to act quickly and effectively in order to mitigate the loss using the powers afforded to him under the PFA. Indeed, the purpose of section 33A is to ensure compliance with or to prevent a contravention of the PFA. Moreover, section 33A does not operate in isolation but must also be considered in the context of inter alia section 25 (inspections and investigations), section 26 (the Registrar may intervene in the management of a fund) and section 37 (the imposition of administrative penalties) of the PFA. These provisions constitute a package, if you will, of regulatory sanctions which the Registrar can impose to ensure effective regulatory control over registered retirement funds. 3. The Registrar s office has embarked on a project to reissue some PF Circulars and Information Circulars as directives in accordance with section 33A and in order to give them the force of law. While the Registrar accepts that PF Circulars do not have the force of law, it must be noted that it is lawful and perfectly acceptable for an administrative functionary, such as the Registrar, to issue PF Circulars and now directives. There is a whole body of case law on this issue, and some of the principles which have been crystallised in these cases over the years can be summarised briefly as follows: (a) Circulars are not unlawful, but constitute a set of general principles, emanating from the Registrar, as to the standards to be applied in respect of certain matters entrusted to him by the Pension Funds Act and the regulations. They serve the very important purpose of providing guidance, particularly in complex matters. They also provide important information to the public as to how, in the ordinary course, certain official or administrative matters will be dealt with. (b) Although guidelines and circulars are not ultra vires and serve a very important governmental function, the qualification to this is that an administrative functionary must not elevate such guidelines into inflexible rules which override the facts and circumstances of a particular case.

3 3 4. Adv. Ismail asserts that section 33A is arguably unconstitutional on grounds of vagueness. The Registrar disagrees. When section 33A was still in bill form, not only was the State Law Adviser satisfied with the constitutionality of the provision, but it also passed muster with the Parliamentary Committee on Finance. Indeed, Parliament itself was satisfied that sufficient constitutional safeguards were built into section 33A when the section was enacted. 5. In our view, Adv. Ismail misconstrued section 33A(4) of the PFA. This section provides that in the event of a departure from section 3 (1) or 4 (1), (2) or (3) of the Promotion of Administrative Justice Act No. 3 of 2000 ( PAJA ), which is a contingent provision, the directive must include a statement to that effect and the reasons for such departure. The aforementioned provisions of PAJA deal with procedural fairness in administrative action as provided for in the Constitution. Read in its proper context, section 33A(4) implies that in order to ensure that the constitutional rights of parties who will be affected by the issuing of a directive are adequately protected, the Registrar must in the first instance take into account those provisions of PAJA which are explicitly mentioned in section 33A(4). It does not mean that the Registrar would in all cases where directives are issued depart from the aforementioned provisions of PAJA. The Registrar is mindful of this constitutional injunction and will ensure that due consideration is given to the stated provisions of PAJA as a matter of course when applying section 33A. In any event, even if the Registrar departs from the aforementioned sections of PAJA when issuing a directive, which in practice will happen very rarely if at all, the Registrar would be obliged to justify his decision by including a statement to that effect and the reasons for such departure in the directive. In our view, this requirement provides sufficient constitutional safeguards to affected parties, while at the same time not diluting the constitutional requirement of just administrative action. While the implementation of section 33A may very well result in litigation, the Registrar considers this to be a necessary concomitant of the business of regulating retirement funds under the PFA and is no different from litigation which may result from the Registrar s decision under any other provision of the PFA.

4 4 6. The Registrar does not agree that section 33A affords him an unfettered discretion as was argued by Adv. Ismail. The Registrar intends to exercise his power to make directives reasonably, rationally and judiciously, with due consideration to the particular circumstances and facts of each case in which a directive is required. Also, the industry will be given the opportunity to provide comment on draft directives before they are finalised, as is currently the case with PF Circulars. In fact, on 10 December 2007 the Registrar issued his first directive which dealt with the requirement for bargaining council funds to register under the PFA on or before 1 January In that instance none of the concerns that were raised by Adv. Ismail materialised and by all accounts bargaining council funds are making a concerted effort to comply with the first directive and to get on with the business of running their funds. 7. Adv. Ismail is correct when he states that the registrar is not to be equated with a judicial official. He does not possess nor can he be expected to possess an intricate knowledge of the finer points of constitutional law and statutory interpretation. However, what he seems to forget is that the Registrar does not act alone when he makes decisions in terms of the PFA or when he is required to implement and enforce the provisions of the PFA in any given situation. The Registrar acts in concert with inhouse legal counsel, the chief actuary and other staff who are experts in their field. In some cases when important decisions have to be made which could potentially have farreaching consequences for the retirement fund industry, the Registrar would request external legal opinion from eminent senior counsel. All of this is to ensure that the administrative action that is ultimately decided upon by the Registrar bears the hallmark of reasonableness, rationality and constitutionality. It would be no different when exercising the power to make directives in terms of section 33A. That is not to say that the Registrar does not at times err in his decision-making or the manner in which he enforces the PFA it is merely to provide some context and clarification in response to Adv. Ismail s seemingly simplistic notion as to how the Registrar s office operates. 8. In paragraph 25 of his paper Adv. Ismail cites examples of cases where administrative action had already been taken by the Registrar and which, in his view, had a severe effect on affected persons. He then argues that in relation to the constitutionality of section 33A, these examples provide convenient yardsticks as to what we can expect from the registrar in the form of directives, ostensibly to show that the Registrar had already made fundamental errors of law in the past which will be perpetuated when he exercises his power to issue directives.

5 5 9. The first example he cited in paragraph 25.2 concerns Information Circular PF No. 4 of 2008 on Specialist Tribunals, which was still in draft form when Adv. Ismail s paper was written. This information circular was finally issued on 18 April 2008 after several redrafts, which took into account substantial input from the industry. According to Adv. Ismail, when the circular was still in draft form Adv. John Myburgh pointed out that this draft circular is incorrect in its interpretation of the PFA. It must be noted that the reference to Adv. Myburgh s statements is nothing more than a summary of the expression of his opinion, i.e. that the Registrar is wrong in his interpretation of the PFA. That is all it was an opinion. The Registrar holds a different opinion and has not sought to elevate his interpretation of the PFA into law. Consequently the circular on Specialist Tribunals is an Information Circular with no force of law (but refer to the arguments in paragraph 3 above). It seeks to give guidance on aspects where the whole industry seems to be in the dark. Furthermore, the esteemed advocate s comments were directed at a draft circular that was out for comment at the time. His comments, as well as those of others in the industry, were taken into account, afforded due weight and resulted in a final version which was amended. This is a process and it would be wrong to only consider some comments that were made during the consultation process, without taking the big picture into account. 10. The second example relates to the FSB Appeal Board s judgment in the matter of Standard Bank Group Retirement Fund v Registrar of Pension Funds, which was an appeal against the Registrar s decision to reject the fund s valuation report for not correctly reflecting the financial condition of the fund in terms of section 16(9) of the PFA. The statement in paragraph 25.5 of Adv. Ismail s paper that the Registrar s approach with regard to valuation reports was held in the Standard Bank case to be fundamentally wrong appears nowhere in the judgment. This is a conclusion that was arrived at by Adv. Ismail himself. Perhaps a proper reading of the Standard Bank judgment is required. Nowhere is such a finding made in paragraph 11 of the judgment as was suggested by Adv. Ismail s footnote (see footnote 13 on page 12 of the paper) and if one has regard to the whole judgment it becomes clear that the parties sought to obtain clarity on difficult issues from the FSB s Appeal Board. In the Standard Bank case the Appeal Board performed a balancing act and the narrow contention of the appellant was rejected, but the very broad contention by the Registrar was also not upheld. The Appeal Board made a finding in between. Can one really say that the Registrar was fundamentally wrong in his approach? We think not, because some of the considerations that the Registrar took into account when he rejected the fund s valuation report were clearly warranted, as was suggested by the Appeal Board in paragraph 17 and onwards of the Standard Bank judgment.

6 6 11. It must also be noted that the industry, including members of the Pension Lawyers Association, had ample opportunity to make constructive comment on the 2007 amendments to the PFA when these were still in bill form and they could also have made representations in Parliament, during the public hearings on the bill. It is respectfully submitted that now that the proverbial horse has bolted, the Registrar is presented with fallacious arguments which at this late stage he can do nothing about. 12. Finally, it must be remembered that the PFA, as amended, is an Act of Parliament which the Registrar has a duty to uphold, implement and enforce as it stands. This the Registrar intends to do with the necessary measure of discretion and reasonableness required of him. JURGEN BOYD THE REGISTRAR OF PENSION FUNDS 7 May 2008