FSB revokes pension administrator

The Financial Services Board (FSB) has suspended the approval of IME Actuaries and Consultants (Pty) Ltd (IME) to act as professional benefit administrators of pension funds.

The move by the registrar of pension funds follows a complaint from a pension fund that IME had charged the fund R2 561 238 to extract data needed for its surplus apportionment scheme from their records. Quotations subsequently requested by the FSB from six different administrators for similar work, varied between R116 000 and R540 000.

FSB deputy registrar of pension funds, Jurgen Boyd, says IME was asked to give a detailed breakdown of the professional services rendered by the firm that would justify an account of R2, 56 million.

IME, as a benefit administrator approved in terms of section 13B of the Pension Funds Act, 24 of 1956, is a financial institution in terms of section 1 of the Financial Services Board Act, 97 of 1990.

A pension fund administrator, as a financial institution, as well as its directors, officials and employees, have certain fiduciary duties towards the pension funds for whose administration they are responsible, including the requirement at all times to observe the utmost good faith and to exercise the care and diligence required of a trustee in the exercise or discharge of his or her powers and duties.

The seriousness of this obligation in relation to financial institutions is underlined by the wide powers given to the registrar by section 6(2) of the Financial Institutions  (Protection of Funds) Act, 28 of 2001. For the purposes of ensuring compliance with the requirements of the law in general and more specifically in this instance, the requirement of utmost good faith, the registrar may by notice direct the institution to furnish information within a specified period or to appear before the registrar for questioning.

Under these circumstances, where an approved administrator of pension funds charges an amount of R2 561 238 for services which should not exceed, at best, R540 000, the question arises whether or not such an administrator should be allowed to continue in business, irrespective of any pending litigation or commercial dispute between the administrator and any fund.
 
The registrar has instructed IME not to enter into any new contracts and make appropriate arrangements for the transfer of its present work to other administrators by not later than 29 September 2006. IME must also advise the board of management of each of their funds of this suspension.