Trying something else

The Pretoria High Court has granted an order on application by the Registrar of Pension Funds to place the Joint Municipal Pension Fund under the management and control of an independent board of trustees.

Six trustees will serve on the board, three of whom are professional persons appointed by the Registrar. A chairperson with both a deliberative and casting vote will be elected from these appointees.

The remaining three trustees are to be elected by the trustees who were in office on 1 January 2004 to ensure a measure of continuity in the administration of the Fund.

The three professional trustees appointed by the Registrar are Jan Mahlangu, Retirement Funds Coordinator of the Congress of the South African Trade Union, Nikki Howard, a practising Johannesburg attorney who specialises in pension law, and Karen Biggs of the South African Institute of Chartered Accountants.

The order followed a failed attempt by the Registrar during September last year to have the business of the fund placed into curatorship.

The Registrar has been granted leave to appeal in that matter and the appeal is likely to be heard later this year.

The Registrar has succeeded in establishing independent control over the Fund's affairs after the Fund lost a massive R1.4bn of its assets through investments in agricultural derivative contracts in the period March 2001 to December 2002.

A second inspection instructed by the FSB during October 2003 concluded that the former trustees of the Fund had neglected their fiduciary duties by failing to exercise suitable control over the Fund's investments in agricultural derivatives over that period.

Amongst others, the trustees virtually ignored early "warning lights" and admonishments by the Registrar's office, which, if heeded, could have averted much of the ultimate loss. 

The former trustees have persistently denied any neglect on their side and imputed all blame on the Fund's former brokers.

The new board will perform its functions in terms of rules approved by the Court and have been assigned specific powers and duties. These include that the new trustees must -

• investigate all possible avenues of recovering losses suffered by the Fund.
• refer criminal irregularities to the prosecuting authorities.
• give priority to the submission of a scheme to the Registrar setting out proposals to restore the financial soundness of the Fund.
• effectively communicate with the beneficiaries of the Fund.
• consider and implement steps to improve the sound governance of the Fund.

Finally, the trustees have been ordered to report back to the Court within six months. They will report on hardships of fund members, the recovery of any losses and when the Fund will be able to revert to normal governance in terms of its rules, among other things.