It seems that the financial sector reforms that started over five years ago are finally gaining some traction, but there are still a lot of gaps in positions, process and protocol that need to be filled.
The Financial Sector Regulation Act, which was promulgated in 2017, and focused on establishing regulatory standards to strengthen supervision of the sector, only saw former Finance Minister Tito Mboweni, appointing the first Ombud Council Board and a Chief Ombud for the Council, as prescribed by the Act, in May last year.
And although it finally gave effect to the new financial Ombud system, Eileen Meyer, who was appointed as a Chief Ombud was only a transitional measure, until a full-time Chief Ombud could be appointed.
Personal Finance is still waiting for the National Treasury’s response on whether the vacancy will be filled anytime soon.
Meanwhile, in September, the current Minister of Finance, Enoch Godongwana, appointed Thobile Prudence Masina as the Acting Ombud for Financial Services Providers (FAIS Ombud). Masina served as assistant Ombud since October 2017.
She replaced Nonku Tshombe, who acted in the position from 1 December 2019.
According to media reports her appointment was just for a period of three months from 13 September 2022, or until a new Ombud was appointed and assumed duty, whichever occurs earlier.
Subject to the appointment processes that were already under way, it was anticipated that the new FAIS Ombud will assume office no later than 1 November 2022. Nothing much has been reported on the matter since then, so whether the Treasury will make the deadline remains unclear.
The Council is required to oversee the recognition, co-operation and promotion of public awareness of ombud schemes, which includes the ombudsman of Long-Term Insurance, Short-Term Insurance, Financial Advisory and Intermediary Services; Pension Funds, Credit and Banking.
The Ombuds council also makes mention of a Johannesburg Stock Exchange ombud on its website, but it is not clear what that entails.
Personal Finance has reached out to the Treasury and the bigger bourse to provide clarity on what this position entails, and whether the courtesy of oversight will be extended to the other few other licensed stock exchanges like A2X and the Cape Town Stock Exchange.
Meanwhile, both the Council and Financial Services Conduct Authority (FSCA) stated on their respective websites that the Council is “also required to protect the independence and impartiality of ombud-offices, resolve overlaps of jurisdictional coverage of different ombud schemes while also monitoring their performance and their compliance with the requirements of the Act.
The designation is set up as a “catch-all” complaint handling function previously performed by the FAIS Ombud in terms of the repealed Financial Sector Ombud Schemes Act, 2004.
Another change in the pipeline is at the Office of the Pension Funds Adjudicator (PFA), which will be renamed the “Retirement Funds Ombud” and for the Pension Funds Act to be called the “Retirement Funds Act”, according to a media statement released in conjunction with its integrated report for the financial year 2021/22 on Tuesday. It said that the “dispute resolution landscape is being radically reshaped to ensure a consistent framework across the financial services sector whilst providing for quick and cost-efficient review of an aggrieved party’s grievance.
“South Africa is well underway to implement a Twin Peaks model of regulation in its financial sector. The introduction of the FSR Act and the establishment of the FSCA was one of the first major steps taken towards achieving this objective. The Act also made consequential amendments to the Pension Funds Act and other financial sector legislation, which included amendments of the Act affecting the mandate of the PFA.
The evolution of the Financial Services Appeal Board into the Financial Services Tribunal (FST) was one such amendment as it brought within the ambit of the FST’s jurisdiction decisions made by the Pension Funds Adjudicator (PFA). The FST has been in operation since 2018 and has been a welcome process for the quick and cost-efficient review of an aggrieved party’s grievance. Decisions made by the FST have shaped some of the PFA processes to ensure that parties are not unduly prejudiced.
Muvhango Lukhaimane, the PFA, said in the Report that the Ombud Council acts as a regulator of ombud schemes and the PFA will be subjected to such regulation.
“The PFA has started engaging with the interim Chief Ombud and making available all requested information to assist the Ombud Council in performing its mandate.
“The National Treasury is investigating an optimal operating model for the Ombud Schemes including the PFA to ensure a more effective ombud system in the financial services sector.
“The PFA has made submissions to the National Treasury on the proposed models and continues to engage in an effort to ensure challenges in the current system are addressed.
“The proposed amendments also enable the sharing of information between ombuds and the regulator. This is positive as it creates an opportunity to establish a system for the exchange of information, the objective of which should be to reduce systemic issues giving rise to common types of complaints in specific retirement funds,” said Lukhaimane.
She said while the FSR Act was intended to legislate the manner in which regulators and ombuds-offices conduct themselves, the Conduct of Financial Institutions Bill (CoFI) is intended to legislate how financial institutions such as retirement funds are expected to conduct themselves.
The second draft of the CoFI Bill was published for comment and the PFA took the opportunity to submit comments.
Certain consequential amendments to the Pension Funds Act were proposed which, if passed, would likely have a significant impact on the PFA’s mandate.
One of the complex issues under discussion is the proposals around the disposal of death benefits.
“It is intended that all conduct issues will be exported from the Pensions Act into the CoFI Bill as an overarching piece of legislation that applies to the conduct of all financial institutions, including retirement funds,” said Lukhaimane.
The publication of conduct standards in terms of both the FSR Act and CoFI Bill will also form part of the legislative framework that retirement funds will be expected to abide by.
BUSINESS REPORT