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FSB takes first step against Command Holdings

11 May 2007 Gareth Stokes

The Financial Services Board (FSB) obtained a High Court order placing Command Holdings' provident fund under provisional curatorship on Thursday, 10 May 2007. Command Holdings stands accused (amongst other things) of failing to pay monies deducted fro

Such payment is required in terms of section 13 A of the Pension Funds Act. The FSB determined that the amount of outstanding payments to the provident fund amounted to R2.2 million at the end of November 2006.

The FSB intervened in the matter in January 2007. They obtained an undertaking from the employer that the outstanding payments would be made to the provident fund by way of monthly instalments. None of the agreed instalments had been paid by the end of March 2007, and the FSB proceeded to court

An extensive list of contraventions

In their affidavit to the court, the FSB lists a number of findings from the report drawn up after initial investigation into the provident fund, completed 4 April 2007. These include a number of oversights by the board of trustees which result in non-compliance with the Pension Funds Act.

Of primary concern was the fact that the fund had been unable to secure final registration due to a number of outstanding queries. In addition the provident fund operated without a board of trustees during the period March 2005 to August 2006 and financial statements for the 2005 and 2006 year ends were overdue.

The report also concluded that the current appointed board of trustees appeared not to be conversant with the provisions of the Act. These findings once again highlight the need for better education of trustees, and more careful attention to the appointment of individuals to positions on boards of trustees. It appears that the trustees appointed to the provident fund in question were not adequately prepared for the task at hand.

No place for conflict of interests amongst trustees

The FSB report also found that "Two consecutive participating owners in the Fund had deducted contributions from member's salaries, but had failed to pay such contributions to the Fund. [Section 13 A of the Pensions Act deals with the payment of contributions to a pension fund and stipulate that these are to be transmitted into the Funds bank account not later than seven days after the end of the month for which the contribution is payable. A contravention of the provision constitutes an offence section 37 of the Pensions Act]."

This contravention relates to the fact that Mr Potgieter held a position as both employer and trustee. It was found that Potgieter influenced decisions made by the board of trustees. The trustees of the fund had failed to take any action against the employer when a repayment agreement entered into with the FSB was not carried out.

Return court date in June

Shantha Padayachee was appointed by the court as curator. The provisional order was granted until the 19 June 2007, when the curator will report back to the court.

There is enough evidence to suggest the provident fund requires new management. At present it seems the major remaining issue relates to the failure of Control Holdings to pay the outstanding provident fund contributions.

The curator will be able to sort out various problems at the provident fund, but will not be able to force the employer to hand over these outstanding payments. In this regard, it might be appropriate to institute some form of proceedings against the company to ensure that they make the payments as required by law.

Editor's thoughts:
We have reported on a number of poorly managed institutions that have been placed under the control of curators this year. Fidentia Asset Management was the first, followed by Ovation and Pro Sano Medical Scheme. It appears that these companies chose to ignore initial attempts by regulators to avoid court action. Why do you think that individuals in positions of trust continue to ignore attempts by regulatory bodies to get their affairs in order? Send your comments to
gareth@fanews.co.za.

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