Sanlam Limited · JSE:SLM
Sanlam — Sanlam Institutional Insights
26 slides from Sanlam's conference presentation
Slide 1: Challenges Trends Opportunities: Institutional Insights
Challenges Trends Opportunities Institutiona Insights © Saniam
Slide 2: 'Fit and Proper' Requirements and Trustee Liability Issues
‘Fit and Proper’ Requirements and Trustee Liability Issues TASHIA JITHOO, PARTNER BOWMAN GILFILLAN INC
Slide 3: Increased Focus on Governance
INCREASED FOCUS ON GOVERNANCE • Different countries & regions are at different stages of governance development but have been some observable trends • Between 2003 – 2008 more studies around links between fund performance & fund governance • From 2008 (US, Europe & Australia) focus is on how best to
Slide 4: What does fund governance entail?
What does fund governance entail? Organizational Coherence People • Clarity of purpose • Qualities • Structure of the governing board • Skills • Proper allocation & deployment of resources • Competencies • Recruitment • Remuneration Practices • Protection Processes Accountability Mechanisms • Genera
Slide 5: 'People' as Central to Proper Fund Governance
‘PEOPLE’ AS CENTRAL TO PROPER FUND GOVERNANCE “Trusteeship today requires significant expertise, yet many have identified trustees as being the weakest link in the value chain” (NAPF Discussion Paper, 2005) “Trustees are a mass of well-intentioned but not necessarily expert folk” and have represente
Slide 6: The Broad Notion of 'Fit & Proper'
The Broad Notion of ‘Fit & Proper’ • Fitness: Ability to fulfil the role - knowledge, skill, experience, competence • Propriety: Suitable character to occupy a position of trust – eg integrity, honesty, good faith • Amendment to s7A of PFA – trustees to acquire level of skill and training as ‘may be
Slide 7: Context Matters
CONTEXT MATTERS SA environment : • Low levels of financial literacy • Large pool without formal qualifications • Small pool of experiences trustees • At least 50% member elected trustees in occupational funds • High turnover of trustees • Remunerative incentives generally only for independent truste
Slide 8: Let's take a tour . . .
Lessons to be learnt Let’s take a tour . . . 8
Slide 9: OECD Guidelines
OECD Guidelines Trustees “should be subject to minimum suitability (or non-suitability) standards in order to ensure a high level of integrity, competence, experience and professionalism in the administration of the pension fund. The governing body should collectively have the necessary skills and k
Slide 10: Poland
POLAND Law on the Organisation and Operation of Pension Funds (1997) – fit & proper requirements include: • Propriety requirements apply to all trustees • Management Board At least 2/3 must have 7 year employment history At least 2/3 must speak Polish At least 1/3 must have degree in law, economics
Slide 11: USA
USA • “Duties imposed by law on fiduciaries have been viewed as sufficiently rigorous to ensure, in most cases, that qualified individuals are appointees” • Prescribing specific degrees or training viewed as unnecessary because trustees usually drawn from senior company management or delegated exper
Slide 12: Germany
GERMANY German Insurance Supervision Act • qualified, reliable & suitable for job • “sufficient theoretical & practical knowledge” Usually means managers having management experience within insurance co or pension fund for at least three years & knowledge of their portfolio 12
Slide 13: United Kingdom
UNITED KINGDOM • “Appropriate knowledge & understanding of the law relating to pensions & trusts, principles relating to funding and investment of assets” • “Conversant” with certain specified scheme documents (trust deed, rules, IPS, most recent financials) & other documents regarding current polic
Slide 14: Australia
AUSTRALIA • 2006 - Fit & Proper requirements became part of the licensing requirement for funds as overseen by APRA • Fitness requirements met on collective basis • Working knowledge of law & its application • Basic investment knowledge • Proven professional & managerial competence • Proper requirem
Slide 15: Australia cont
AUSTRALIA cont • Focus is on ensuring adequate skill while performing function instead of ensuring they meet set of expectations before appointment. • If don’t have expertise, knowledge or experience initially, APRA expects them to undergo sufficient training within ‘reasonable period of time’ (usua
Slide 16: Australia cont
AUSTRALIA cont Must adopt a Fit and Proper Policy which must deal with the following: • Identify & articulate skills & competencies required at board level & individually • Processes to identify & remedy skill gaps • Who will conduct fit & proper assessments and how done • Process to ensure complian
Slide 17: Issues for Each Fund to Consider
ISSUES FOR EACH FUND TO CONSIDER • Nature of fund & membership • Available skills • Necessary skills at time of appointment • Core skills & specialized skills • Training • Performance assessments • Risk matrix • Fit & Proper Policy ** Of course any prescribed minimum requirements will apply 17
Slide 18: Trustee Liability Issues
TRUSTEE LIABILITY ISSUES Affirm Marketing (Pty) Ltd & others v IF Umbrella Pension Fund & others (PFA) • Former trustees jointly and severally liable for amount of R20 mill (less settlement amount obtained from Dynamique Consultants & Actuaries) • A new state of uneasy? 18
Slide 19: Amendment to PFA
AMENDMENT TO PFA 7F Liability of board member In any proceedings against a board member in terms of this Act, other than for wilful misconduct or wilful breach of trust, the court may relieve the board member from any liability, either wholly or partly, on terms that the court considers just, if it
Slide 20: What is Joint & Several Liability?
WHAT IS JOINT & SEVERAL LIABILITY? • Personal liability vs fund liability • Joint & several liability - each liable for whole • Joint liability – each liable for proportionate share 20
Slide 21: Is Section 7F the Answer?
IS SECTION 7F THE ANSWER? • Court has discretion to excuse from liability • Need to prove case in court • Time and cost • Outcome unpredictable • Should be fallback position not means of first resort ! Note: Does not mean that no liability in first 6 months when ‘attaining prescribed level of skill
Slide 22: Other Protection Against Personal Liability
OTHER PROTECTION AGAINST PERSONAL LIABILITY • Indemnities • Exoneration clauses • Trustee Insurance • But how are these different from each other and which to use when? 22
Slide 23: Difference Between an Indemnity, Exoneration & Insurance
DIFFERENCE BETWEEN AN INDEMNITY, EXONERATION & INSURANCE • Indemnity - Third party covers the liability • Insurance • A form of indemnity but received in exchange for premiums • Fidelity insurance • Exoneration • Excuses person from liability • Express exonerations in rules vs statutory exonerations
Slide 24: Limitations
LIMITATIONS Indemnities • Only as good as the person giving it otherwise liability remains Exoneration clauses • No action required by the trustee • Excused from liability but not if bad faith, reckless, wilful neglect, dishonesty or fraud • Does not cover certain criminal liability or civil penalti
Slide 25: Factors to Consider
FACTORS TO CONSIDER • Consider types of protection mechanisms, which is appropriate when, gaps in cover & how to ensure protection for all parties (trustees, members and fund) • Necessary also to encourage people to accept positions as trustees when they may not do so otherwise • Ensures effective a
Slide 26: End: Your thoughts and questions?
END Your thoughts and questions? 26