FSCA Trustee Toolkit (TTK)
The extended period for completion of all 22 modules of the FSCA Trustee Toolkit expired on 30 September 2024. This applied to trustees who were in office for 6 months and longer on 30 September 2024 (newly appointed trustees have six months within which to complete the TTK).
FSCA Information Request 3 of 2024 was issued on 9 October 2024, requesting principal officers or administrators of funds to provide details of fund boards to enable the FSCA to determine whether there has been non-compliance meeting these deadlines and whether regulatory action should be taken.
The FSCA has indicated that they are considering publishing the names of non-compliant funds and trustees.
The information must be provided by no later than 6 November 2024 (Note: Whilst the initial information request refers to two dates, one being 25 October 2024 and the other 6 November 2024,a revised document was issued by the FSCA the day after, correcting the date to 6 November 2024).
Two-Pot
FSCA Communication 31 of 2024 – Forms for Section 14 Transfers
Amendments to the Regulations under the Pension Funds Act to give effect to the Two-Pot system are underway. Until these regulations have been finalised, however, the section 14 application forms prescribed under FSRA Conduct Standard 1 of 2019 – Conditions for amalgamations and transfers in terms of section 14 of the Pension Funds Act, 1956 (Act No. 24 of 1956) need to be adapted to reflect the accommodate the Two-Pot changes.
The Authority on 8 May 2024 published the draft amendments to FSRA Conduct Standard 1 of 2019 (“the Draft Amendments”) for public consultation, with the due date for submissions being 19 June 2024.
The Draft Amendments propose to:
(a) Remove the Section 14 application forms from the Conduct Standard itself, so that the forms can be amended without the lengthy legislative process of amending a conduct standard each time that a change to the forms is required, and
(b) Enable the FSCA to determine the manner of submission, content and format of the section 14 application forms.
Since the Draft Amendments have not yet taken effect, the Authority has, as an interim measure, granted exemption to all funds from the requirement to use the forms prescribed under FSRA Conduct Standard 1 of 2019. The exemption is granted subject to the requirement that funds must use the revised forms proposed under the Draft Amendments instead.
The exemption will be withdrawn once the Draft Amendments are finalised and the determination notice is published on the FSCA’s website.
FSCA Communication 33 of 2024 – Request for information on administration fees relating to the Two-Component system
In FSCA Communication 33 of 2024, the FSCA reminded boards of retirement funds that they have a duty to ensure that the interests of all members are protected and must ensure that any and all fees charged for the purposes of withdrawals under the Two-Component system are reasonable.
The FSCA therefore issued this request for information to ascertain details on the administrative fees or charges that are being charged on savings withdrawal benefits, as well as how the fees will be calculated by administrators and self-administrated funds.
The schedule to be completed by administrators and self-administered funds requires, inter alia, information regarding costs incurred by administrators and self-administered funds in respect of:
- Adapting systems to be able to administer the Two-Pot system;
- Staff training;
- Additional staff;
- Setting up call centres for Two-Pot;
- The costs of drafting and distribution of member communications;
- Estimated annual cost relating to maintaining records in a manner aligned with the Two-Pot requirements.
Further information requested relates to how the above costs will be recouped and the period over which the initial costs will be recovered.
It is the FSCA’s intention to publish a report of its findings following obtaining the requested information.
The information requested had to be submitted by 30 September 2024. However, the FSCA has also indicated that it has embarked on a process to request information from administrators and self-administered funds on an ongoing basis regarding challenges and complaints received in relation to Two-Pot.
Valuation exemption
FSCA Communication 37 of 2024 – Supervisory Guidance: Clarification on relevant considerations related to an application requesting exemption from performing a valuation
This communication follows requests by the industry for clarity regarding the consideration of applications for valuation exemption.
The industry is reminded in this communication that every registered fund must, in terms of the Pension Funds Act, appoint a valuator and have its financial condition investigated and reported on by the valuator every three years. It is, however, possible for a fund to be granted exemption from these provisions in the Pension Funds Act in terms of Section 2(5)(2) of the Pension Funds Act, which allows the FSCA to, where practicalities impede the strict application of a specific provision of the Pension Funds Act, exempt any fund from, or in respect of, such provision on conditions determined by the FSCA.
Such an exemption must at the same time be considered in accordance with Section 281(1) of the Financial Sector Regulation Act, 2017, which qualifies the power to grant an exemption where the FSCA considers that granting the exemption:
(a) will be contrary to the public interest; or
(b) may prejudice the achievement of the objects of a financial sector law.
Having regard to the above, the following is stated as requirements and considerations for a valuation exemption to be granted:
- The registered rules of the fund, which comply with legislative requirements, as well as the audited annual financial statements of the fund as at the effective date of the exemption application, must be available;
- Only those funds where there is intrinsically a lower risk due to the manner of operation of the fund will be considered for exemption;
- The date of the required exemption cannot be more than three years after the previous statutory actuarial valuation report that was due to be submitted, representing the date at which the fund would have performed a statutory actuarial valuation.
- The conditions as set out in Board Notice 59 of 2014 must be complied with.
Specifically:
- Exemption will only be considered for a purely defined contribution fund which allocates the full investment returns earned to the members in the period in which the returns were earned, ensuring that minimum benefits are provided;
- Such a fund should not have a significant surplus, since all contributions and returns are allocated to the members and hence there is no source from which surplus should arise; and
- A fund that was in a deficit position, either at the previous effective valuation date, the current effective valuation date or any of the years in between, will not qualify for exemption.
Enquiries may be directed to Giulia Tognon at giulia.tognon@fsca.co.za.
FSCA fees
FSCA Communication 36 of 2024 – Publication of FSCA General Notice 1 of 2024 – Determination of fees charged by the Financial Sector Conduct Authority
The purpose of the communication, issued on 27 September 2024, was to inform stakeholders that the new FSCA fees, effective 1 October 2024, were published under FSCA General Notice 1 of 2024. In respect of fees levied in terms of the Pension Funds Act, this notice replaces Government Notice No 73 of 4 February 2009.
Stakeholders must note that certain services that previously attracted no fee will now be subject to payment of a fee.
Information Regulator
Protection of Personal Information Act, 2017 (POPIA) – Draft Regulations relating to the Processing of Data Subject’s Health or Sex Life by certain Responsible Parties
The Information Regulator has issued draft regulations on the processing of data subjects’ health and sex life information by responsible parties.
Health Information is defined as personal information or an opinion relating to the physical and mental health of a data subject, including:
- the provision of healthcare services; and/or
- any testing, treatment, and diagnosis which reveals information about his/her health status, and
- the decision of such a person regarding any illness, disability, or injury.
Sex life information is defined as any information that may reveal a data subject’s gender identity, sexual orientation, or sex.
It is proposed that the draft regulations will apply to the following responsible parties:
- Insurance Companies;
- Medical Schemes;
- Medical Scheme Administrators;
- Managed Healthcare Organisations;
- Administrative Bodies;
- Pension Funds;
- Employers;
- Operators of Administrative Bodies, Pension Funds and Employers.
Not all of the draft regulations will apply equally to all of the listed responsible parties. For example:
1. Insurance companies, medical schemes, medical scheme administrators, and managed healthcare organisations will have to obtain consent from the data subject or competent person or the next of kin of a data subject before processing the data subject’s health or sex life information. In addition, where any of these responsible parties are required to process health or sex life information for purposes set out in section 32(i)(b) of POPIA, they will have to obtain authorisation from the Information Regulator to do so.
2. Administrative bodies, pension funds, employers and institutions that work for them may, without consent or authorisation, process health and sex life information if necessary for:
a. the implementation of the provisions of laws, pension regulations or collective agreements which create rights dependent on the health or sex life of the data subject; or
b. the reintegration of or support for workers or persons entitled to benefit in connection with sickness or work incapacity.
The draft regulations that will apply to all the listed responsible parties, including pension funds, employers, administrative bodies and their service providers, include the following:
1. Legitimate Interest Assessment (LIA)
The listed responsible parties may be required to perform a Legitimate Interest Assessment (“LIA”) to identify the legitimate interests and determine whether the identified legitimate interest is appropriate to use as a lawful basis for processing personal information.
The proposed LIA is a three-part assessment, which will involve:
Part 1: A Purpose Test to identify the legitimate interest by setting out the purpose for processing health or sex life information concerning a data subject, as well as the benefits associated with the responsible party processing such information;
Part 2: A Necessity Test to determine if the processing of such personal information is necessary to achieve the goal/purpose; and whether there are no less intrusive methods that can be used to achieve the goal/purposes; and
Part 3: A Balance Test which requires a responsible party to balance their legitimate interest against the interests and rights of the data subject. They must conduct this test by determining the relationship between the responsible party and the data subject, as well as identify the type of personal information being processed and whether it falls within the ambit of special personal information as envisaged in section 26 of the Act.
2. Appropriate Safeguards:
The responsible party is responsible for maintaining the confidentiality and integrity of such information in its possession or under its control by taking appropriate, reasonable technical and organisational measures in accordance with section 19(1) of POPIA;
3. Transfer of Health and Sex Life Information outside of the Republic:
The responsible party may not transfer the health or sex life information of a data subject to a third party in a foreign country unless one or more of the conditions set out in section 72(1) of the Act are met.
4. Retention of Records:
The responsible parties must ensure that they keep records containing health or sex life information of data subjects in accordance with section 13 of the National Health Act 61 of 2003, the National Archives of South Africa Act 43 of 1996, the Promotion of Access to Information Act 2 of 2000 and in accordance with the relevant provisions of POPIA and any other relevant legislation.