FSCA assessment: Treating Customers Fairly and Regulation 28

Update: FSCA Regulation 28
  1. An FSCA assessment
  2. Exemption of large funds

1. An FSCA assessment: Treating Customers Fairly and regulation 28 principles applicable in contracting services to the fund or its board

In December 2023, the Financial Conduct Services Authority (FSCA) sent a communication to the Principal Officers of many retirement funds requesting information relating to transformation in respect of certain service providers.

Funds were requested to complete the following assessment:

    • Treating Customers Fairly [1] (TCF) self-assessment with regards to the implementation of measures to meet the TCF outcomes. This part of the assessment is not new – many funds have completed it already.
    • The Regulation 28 principles of self-assessment with regards to the implementation of measures to consider in contracting services to a fund or its board. [1] TCF is an outcomes-based regulatory and supervisory approach of the FSCA designed to ensure that regulated financial institutions (for example, retirement funds) deliver specific, clearly set-out fairness outcomes for financial customers (for example, members). Funds are expected to demonstrate that they have implemented and are delivering the TCF outcomes in the way that they conduct business.

The assessment had to be returned to the FSCA through its online submission portal by 31 January 2024.

Why has the Regulation 28 assessment been circulated?

The FSCA states that it has set itself supervisory priorities for the current financial year, which includes considering the extent to which Regulation 28 principles are embedded within retirement funds.

Regulation 28 provides that retirement funds have a fiduciary duty to act in the best interest of their members, whose benefits depend on the responsible management of assets. This Regulation requires a fund and its board to consider, in contracting services to the fund or its board, the need to promote broad-based black economic empowerment of those providing services.

Questions set out in the FSCA’s regulation 28 assessment

    • Does the fund have a procurement policy in place? If so, furnish us with a copy of the policy. If the fund does not have a procurement policy in place, outline the procurement process of the fund.
    • When contracting services to the fund and its board, does the fund consider the need to promote broad-based black economic empowerment of entities providing services? (Please explain in detail how the fund meets this condition in the comments section).
    • Does the fund request BBB-EE certification from its service providers when contracting services? If so, please furnish us with copies of such certification.
    • Does the fund evaluate whether its existing service providers continue to promote broad-based black economic empowerment?
    • Do you have a mechanism in place to deal with an existing service provider who no longer complies with the BBB-EE requirements? (Please explain in detail how the fund deals with such a scenario in the comments section).
    • When contracting services to the fund and its board, does the fund consider the need to promote broad-based black economic empowerment of independent trustees providing services if applicable? (Please explain in detail how the fund meets this condition in the comments section and if this is not applicable, please indicate such in the comments).

The assessment should create a baseline for the FSCA to supervise and regulate the effect of the Conduct of Financial Institutions and regulatory interventions on the transformation progress of funds.

2. Exemption of large funds from certain prescribed formats for preparing financial statements

The Pension Funds Act (the Act) requires every fund, within six months of the end of every financial year, to provide the prescribed financial statements to the FSCA that have been audited by the auditor of the fund.

From 21 December 2023, the FSCA’s RF Notice 26 of 2023 replaces RF Notice 5 of 2020, (the Exemption of Large Funds from certain prescribed formats for preparing financial statements under section 15 of the Pension Funds Act).

“Large Funds” are defined as funds with total assets exceeding R50 000 000.

The RF Notice has been published because the prescribed format of annual financial statements does not align with the amendments to Regulation 28 of the Act.

To ensure alignment with the amendments to Regulation 28, the FSCA is planning to replace the current BN 77 Notice with a Prudential Standard, which is currently in draft format.

But in the interim, to deal with the issue of BN77 not currently aligning with Regulation 28, the FSCA has published exemptions in relation to infrastructure reporting and certain Schedules.

The exemption of large funds from the provisions of section 15 of the Act provides for three scenarios:

For the preparation of financial statements in respect of a financial year that ends after 1 March 2018, a Large Fund is exempted from the requirement to complete Schedule D1 when preparing financial statements but must complete the Independent Regulatory Board of Auditors (IRBA) approved illustrative “Auditor’s report template: Audit of the Financial Statements of a Large Retirement Fund (Schedule D)”.

For the preparation of financial statements in respect of a financial year that ends between 1 March 2018 and 31 December 2022, a Large Fund is exempted from the requirement to complete Schedule IB1, but must complete IRBA’s illustrative “Assurance Report on Compliance with Regulation 28 of the Pension Funds Act” that was approved by IRBA in March 2019; and

For the preparation of financial statements in respect of a financial year that ends after 31 December 2022, a Large Fund is exempted from the requirement to complete Schedule IB1 but must complete Annexure A to the notice “2023 Assurance Report on Compliance with Regulation 28 of the Pension Funds Act”.

COOKIE POLICY

Welcome to our website.

1. Introduction

This Cookie Policy explains how we use cookies and similar technologies on our website axioconsult.com. This policy is designed to help you understand what cookies are, how we use them, and the choices you have regarding their use.

2. What Are Cookies

Cookies are small text files that are stored on your device (computer, tablet, or mobile phone) when you visit certain websites. They are widely used to enhance your online experience by remembering your preferences and actions over time. Cookies are not harmful and do not contain personal information like your name or payment details.

3. How We Use Cookies

We use cookies for various purposes, including:

    • Essential Cookies: These cookies are necessary for the basic functioning of our website. They enable you to navigate our site, use its features, and access secure areas.
    • Analytical/Performance Cookies: These cookies help us understand how visitors use our website. They provide information about which pages are visited most frequently, how long visitors stay on each page, and whether they encounter any error messages. This data helps us improve the performance and usability of our website.
    • Functionality Cookies: These cookies allow our website to remember choices you make (such as your username, language, or region) and provide enhanced, personalised features.
    • Targeting/Advertising Cookies: These cookies are used to deliver advertisements that are relevant to your interests. They may also limit the number of times you see an ad and help measure the effectiveness of ad campaigns.

 

4. Your Cookie Choices

You have the option to manage your cookie preferences. You can usually modify your browser settings to accept, reject, or delete cookies. Please note that if you choose to block or delete cookies, some features of our website may not function properly.

5. Third-Party Cookies

We may allow third-party service providers to use cookies on our website for the purposes outlined in Section 3. These providers may also collect information about your online activities over time and across different websites.

6. Updates to This Policy

We may update this Cookie Policy from time to time to reflect changes in technology, law, or our data practices. Any changes will become effective when we post the revised policy on our website.

7. Contact Us

If you have any questions about our Cookie Policy or how we use cookies on our website, please contact us at

By continuing to use our website, you consent to the use of cookies as described in this Cookie Policy.