Independent Compliance Monitoring

"The Financial Services Authority in the United Kingdom in their discussion paper "An ethical framework for financial services" issued in October 2002 offered a framework for the development of values and culture based on compliance

Figure 1 FRAME WORK FOR THE DEVELOPMENT OF VALUES The kinds of values displayed by firm will influence the regulatory relationship we have with them.

The interplay is illustrated below: Values and culture of firms Minimum standards

* Unthinking, mechanical compliance

* Does as little as can get away with

* Culture of dependency

* Tries to abdicate decisions and responsibilities Compliance culture

* Reliant on guidance

* By the book

* Unaware of some risks

* Bureaucratic Beyond compliance

* Risk focused, self policing

*"Buying in" at senior level

* Ethos integrated into most business processes

* Ethos seen as assisting business Values-led business

* Internalise ethos of core values

* Spirit not just letter

* Values focused, goes beyond rules, not just compliance

* Well developed individual responsibility and sense of involvement by (all) staff

* Focus on prevention

* Continued re-assessment and improvement of approach

* Awareness and discussion of ethical considerations at senior and all levels

* Open relationships

* Strong learning culture Regulatory relationship Policing

* Monitoring boundaries

* Detecting and responding to crises

* Enforcement "lessons"

* Basic training Supervising / educating

* Developing ethics and competence

* Looking for early warning signs

* Early action to bounce firms back on track

* Themed / focused visits Educating / consulting

* Facilitating the development of competence and culture

* Values scorecard

* Lighter touch Mature relationship / benchmarking

* Reinforce good practice

* Lead by example

* Re-allocate resources to problem firms

* Sustainable regulation

Many retirement funds in South Africa adopted the minimum standards approach, ensuring that they have the policies as proposed in PF 130. Many more funds now are beginning to appreciate the benefits of good governance and regularly consider their own compliance and how they can approve on this. Independent Trustee Services look at basic compliance requirements for retirement funds using as guidelines the duties of trustees as defined in sections 7A to 7E of the Pension funds Act looking in particular at

* the rules of the Fund,

* compliance with Section 13A and regulation 33 of the Pension Funds Act, 24 of 1956

* the various service level agreements,

* various policies of the Fund,

* mandates of the various sub-committees,

* communication to members and pensioners (in terms of compliance of the relevant PF circulars),

* relevant resolutions,

* appointment of trustees and election procedures,

* an inspection and evaluation of the data, take on, day to day administration, financial management and policies and procedures in use by the current service provider (with specific reference to section 7D(a) and (b) of the Pension Funds Act and the certification by trustees contained in schedule B of the Annual Financial Statements),

* PF 130,

* King III principles, and

* registers kept in terms of regulations and best practice.

Back to top