The Relevance of Ethics and Values in Pension Fund Management.€¦ · •Due diligence...

The Relevance of Ethics and Values in Pension Fund Management.

Phineas P. Sesinyi (Mr.)

Date: 25 February 2019

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Presentation Outline

The Industry at a Glance

Fund Governance

Ethics and Values for Pension Fund Management

Code of Conduct

The Regulatory Fit & Proper Rule

Conclusion

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Retirement Funds Industry @ a Glance

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Retirement Funds Industry

(90)

Retirement Funds

(86)

Pension Funds

(Stand Alone)

(80)

Umbrella Funds

(6)

(282 sub-funds)

Related Business

(4)

Fund Administrators

(4)

At a Glance (2017)

259 301 Members

Total Pension Assets

P82.2b 34%

COVERAGE

12.3 % of Population58 % of formal

working Population

74%

22%

4%

Equity

bonds

cash

other

66%Offshore Investment

Local Investment

45% of GDP

82.275.173.8

59.458.751.4

P E NS

I O N

P ’Billion

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Fund Governance

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• Section 13 of the Retirement Funds Act (2014) states“that every licensed Fund shall have a Board , whichshall be the governing body of the Fund”

• As a governing body, the Act requires the Board tohandle the daily operations of the Fund and ensure thatits administration of the Fund comply with the Act andthe Fund Rules.

Fund Governance

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• The Board has a fiduciary responsibility towards the Fund members to act with due care ,diligence, in good faith, and in the best interests of the members (s14).

Fund Governance

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• The fiduciary responsibility brings the Question of Ethics and Values for Board members.

Ethics and Values

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• Ethics are moral principles that govern a personsconduct;

• Values are fundamental beliefs that a person has.

• Section 14 (2) requires the Board to adopt a Code ofConduct (or moral principles) /Ethics for the standardsof conduct for its Board members.

Ethics and Values

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• Regulation 15, requires that Boardmembers and other service providers signthe Code of Conduct.

Code of Conduct (Ethics and Values)

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• The Code of Conduct shall state the Values of the PensionFund which must be embraced by both the Boardmembers and stakeholders/service providers ( R15 (2)(b)).

• To monitor the Board members’ conduct andperformance towards the Code of Conduct , Regulation 14of the Retirement Funds Regulations, requires that aBoard assesses its performance annually and submit areport to the Regulatory Authority.

Regulatory Fit & Proper Rule

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• Above the Code of Conduct, the Board membersundergo the Regulatory Fit & Proper Assessment,prior to serving in the Board of a Pension Fund.

Regulatory Fit & Proper Rule

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• Qualifications and technical skills, theRegulatory Authority shall also assess for Fit &Proper, subject to these key indicators:

i. Criminal Indicators: Dishonesty,embezzlement of funds, criminalconvictions, Money Laundering…

ii. Financial Indicators: Financialmisconduct, judgement debt, bankruptcy…

Regulatory Fit & Proper Rule

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iii.Supervisory Indicators: history of non-compliance, failure to cooperate, providingincorrect information…

iv. Other indicators: disciplinary measures byprofessional bodies/association, disqualified fromany company directorship…

In Summary

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• Having moral principles determines the core valuesthat guide the sustainable management of a PensionFund.

• The Board members have a fiduciary duty towardsmembers, ensuring that they act in utmost good faith,professional, ethical and in the best interests of themembers at all times.

In Summary

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• Proper conduct of Board members provides a fertileground for sustainable growth of a Pension Fund.

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• Proper due diligence on boarding serviceproviders.

• Sustainable investment strategies.• Due diligence measures-AML/CFT.• Proper monitoring of SLAs.• Annual Board Performance Assessments.

Thank You !

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