When is a proposal an attempt to get out of trouble?

29 May 2006 Angelo Coppola

My soap box definitely still more questions than answers.

Disclaimer: This is a parody of real and imagined events that have transpired in the retirement fund sector in the last couple of weeks. Any references to businesses or individuals mentioned in this newsletter are purely a figment of my imagination, until I get to the bottom of the issue.

The story thus far: Alexander Forbes in R380m resolution of non-disclosed income from bulking, and the FSB and the FAIS Ombud remain tight-lipped.

Alexander Forbes announced on Friday that the Financial Services Board is satisfied that its settlement proposal to retirement funds is fair.

In terms of the proposal Alexander Forbes will pass on R368m to affected clients and contribute R12m to the FSB Consumer Education Fund which, among other objectives, will be used for the training of trustees of retirement funds.

So that was the background.

Now for some of the issues behind this announcement. And here I have to confess that I needed one of our readers to remind me of the issues, as I got neatly side-tracked by the size and timing of the announcement.

It appears that the FSB called for, and received correspondence from the players in the retirement and pension fund sector about whether they were benefiting from secret profits be it from bulking or any other nefarious activities.

It appears that most operators provided information, or at least an intent to investigate their businesses, to determine whether they are guilty of making secret profits.

So the company first implicated in these secret profits has admitted that it did benefit from these profits. It issues a SENS announcement indicating that the FSB was satisfied with the proposal, and one must assume that the FSB had sight of the SENS announcement and the media statement.

And just in case anyone missed the announcement there is a full page, full colour advertisement in at least one Sunday national newspaper.

As one of our colleagues pointed out, the newly entrenched boss of the business can quiet rightly claim that he had no knowledge of any wrong-doing, for the simple reason that he wasnt around. One does have to wonder whether the board of the company was aware of the secret profit taking, and whether they operated in good faith when they appointed the new guy?

There are some obvious questions and before we are accused of not giving a right to reply to anyone - we have asked the FAIS Ombud and the FSB to respond. At the time of publishing this newsletter we hadnt received any communication. We will publish their comments when we receive them.

Question 1: Is this the R12m for consumer education - an admission of guilt fine?
Question 2: What about an investigation by the FAIS Ombud into whether the company was and is fit and proper, and can they continue to conduct business?
Question 3: Why did the company donate R12m to the FSB consumer education drive?
Question 4: How would the FAIS Ombud and the FSB have responded if this was a small operator?
Question 5: Does the acceptance of this proposal mean that the FSB and the FAIS Ombud wont investigate the company?

Editors thoughts:

* All these and other interesting questions may well be answered tomorrow, or the next day.
* I have to assume that the FSB and the FAIS ombud were caught unawares with the announcement and the proposal, and still plan to investigate the company.
* Its interesting that the FSB didnt issue a statement.
* The identities of those involved have been slightly modified to protect the innocent

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