Licensing Guidelines for Administrator of Pension Funds and Pension Services Company

PENSION AND INSURANCE SUPERVISION DEPARTMENT RESERVE BANK OF MALAWI LICENSING GUIDELINES FOR ADMINISTRATOR OF PENSION FUNDS AND PENSION SERVICES COMPANY (Financial Services Act, 2010 and Pension Act, 2010)

PENSION AND INSURANCE SUPERVISION DEPARTMENT 1.0 INTRODUCTION Pension fund administration is highly specialised, as such, an applicant(s) wishing to license as an administrator of pension funds must demonstrate that they have a robust pension administration Information Communication Technology (ICT) platform, good governance structure and risk management systems, financial strength and commitment to Malawi to support this key sector. Any person licensed as an administrator of pension funds shall not hold any other license under the Pension Act, 2010 or the Financial Services Act, 2010 such as investment manager, custodian, insurer or bank. However, if the applicant(s) would like to, in addition to pension administration, be licensed as operator of umbrella funds; corporate trustee of a pension fund; provider of program withdrawals or a combination of any of the above, the applicant(s) must apply for a licence as a Pension Services Company. It is recommended, in the first instance, for potential applicants to contact the Registrar to discuss requirements before formalising applications. 2.0 DEFINITIONS All words and expressions in these guidelines have the same meaning as ascribed to in the Pension Act and the Financial Services Act. 3.0 FORM OF APPLICATION 3.1. Application for a licence must be submitted using the approved forms in accordance with the Financial Services (Licensing and Registration of Pension Entities) Directive, 2014. 3.2. The application is divided into four parts:  Part A: General information of the applicant(s);  Part B: Business plan, financial information, ICT platform and other related information;  Part C: Governance and Compliance; and  Part D: Certification. 3.3. The applicant(s) must take into account the requirements outlined in these guidelines, the Financial Services Act 2010 and the Pension Act, 2010, including the Registrar’s Directives.

PENSION AND INSURANCE SUPERVISION DEPARTMENT 3.4. The applicant(s) must complete the application forms and submit all supporting documents to the Registrar together with prescribed fees. 3.5. Forms must be completed in English and supporting documents must be in English. Where original documents are not in English, they must be accompanied by certified English translations. If a query or request for information is not relevant, applicants must answer ‘no’, ‘none’, ‘not applicable’ or ‘not known’ and provide an explanation where necessary. 3.6. The applicant(s) must certify that information provided in the application and supporting documents is true and correct. 3.7. The applicant(s) must designate a contact person to act on its behalf on matters connected to the application. All communication between the Registrar and the applicant(s) will be directed to the contact person. 3.8. Submitting inaccurate or incomplete documentation will delay processing of the application and may lead to rejection of the application 3.9. Submitting misleading information is an offense under the Financial Services Act, 2010 4.0 APPLICATION PROCESSING 4.1. Upon receipt of an application and prescribed fee, the Registrar shall conduct a due diligence of the application and appropriate verification of materials therein. 4.2. Where the applicant(s) is currently licenced or otherwise operates in a foreign jurisdiction, the Registrar may extend enquiries to that jurisdiction’s regulators. 4.3. The applicant(s) may be invited to make presentations or attend interviews at the Registrar’s office or 4.4. The Registrar may seek to conduct an onsite visit or third party interviews in relation to the application. 4.5. The Registrar may, in his discretion, require further information before processing the application. 5.0 ENQUIRIES Enquiries concerning the preparation, submission and status of an application should be addressed to The Director, Pension and Insurance Supervision Department, Reserve Bank of Malawi, Blantyre.

PENSION AND INSURANCE SUPERVISION DEPARTMENT PART II – DETAILED APPLICATION REQUIREMENTS 6.0 APPLICATION REQUIREMENTS FOR ADMINISTRATOR An applicant(s) must complete the application as follows: 6.1. Part A: General Information and Supporting Documents The applicant(s) must complete the relevant forms included in the Schedule to Financial Services (Licensing and Registration of Pension Entities) Directive, 2014 and provide supporting information as follows: (a) PLR F1: Applicant Details – Company; (b) PLR F3: Responsible Person Details – Directors (to be completed for each director); (c) PLR F5: Responsible Person Details – Other Responsible Persons (to be completed for each responsible person); (d) PLR F6: Significant Owners – Natural Persons; (e) PLR F7: Significant Owners – Corporations; 6.2. Part B: Business Plan, Financial Information, Information Technology ICT) Platforom and Other Related Information; 6.2.1. The application must provide a detailed business plan, financial information and forecast, and shall include: (a) Details of the proposed Malawi operations and organisation structure (b) Details of current operations, services, jurisdictions of operations, corporate structure including a list of other licences held by the group and related jurisdictions [certified copies of licences must be attached]; (c) Overview of business strategy and objectives including services proposed, strategy, business acquisition plan, growth and profitability forecasts as well as implementation plan; (d) Expectations for branch operations and service delivery; (e) Five year financial projection including statement of financial position, statement of comprehensive income, cash flow and

PENSION AND INSURANCE SUPERVISION DEPARTMENT profit forecasts; underlying assumptions and sensitivity analysis of projections; (f) Expectations for fees and services to be charged for administration activities including how administration fees is to be charged to employers and member accounts. 6.2.2. The application shall include details of an appropriate Information and Communication Technology (ICT) platform in line with guidelines on Information and Communication Technology for Pension Administrators; 6.3. Part C: Governance, Compliance, Operating Standards and Capital Adequacy 6.3.1. The applicant(s) must provide information regarding the following– (a) A description of Board operations including: i. Board composition comprising not less than 5 directors a majority of whom reside in Malawi, including the Chairperson, and are independent; ii. Proposals for Board and Executive Management Committees and their membership and Charters; iii. Risk appetite statement and risk management strategy; iv. Identification of potential conflicts of interest and plan for management; v. Expectations for compliance and vi. internal audit function; (b) Completed Fit and Proper Persons Questionnaire on all responsible persons with appropriate attestations in accordance with Pension (Fit and Proper Persons) Directive; (c) Description of arrangements for professional indemnity cover and other relevant insurance policies; (d) Provide a copy of all material outsourcing agreements and written explanations on risks relating to the outsourced activities how arrangements satisfy all governance, compliance and risk management requirements and how ongoing risks will be monitored.

PENSION AND INSURANCE SUPERVISION DEPARTMENT (e) Details and evidence of compliance with capital requirements to ensure that the applicant(s) has the financial strength and commitment to continue operations in the event of overly optimistic business forecasts and a sufficient capital buffer to meet losses arising from operational risks, including: i. A capital plan to support the operation of the administrator ii. Identification of the source of funds and proposed capital composition of the minimum paid up capital requirement 6.4. Part D: Certification The application must include Form PLR F12 - Certification of applications by a company. 7.0 APPLICATION REQUIREMENTS FOR PENSION SERVICES COMPANY Where an administrator would like to, in addition to pension administration, be licensed as operator of umbrella funds; corporate trustee of a pension fund; provider of program withdrawals or a combination of any of the above, the applicant(s) must apply for a licence as a Pension Services Company. An application for Pension Services Company license must, in addition to requirements for administrator of pension funds, include the following in the application; 7.1. Part A: General Information and Supporting Documents The applicant(s) must complete forms; (a) PLR F2: Additional Information for registration of unrestricted pension fund and or umbrella fund (if both, forms must be separate) (b) PLR F4: Responsible Person Details – Principal Officer; 7.2. Part B: Business Plan and Financial Forecasts The applicant(s) must provide information on; (a) expectations for all other general fees and charges including investment management fees and any fees or charges associated with the provision of capital guarantees or guarantees on the minimum return or profit participation.

PENSION AND INSURANCE SUPERVISION DEPARTMENT 7.3. Part C: Governance, Compliance, Operating Standards and Capital Adequacy The applicant(s) must provide information regarding the following– (a) A statement of the proposed investment strategy and strategic asset allocation for the unrestricted pension fund or umbrella fund; (b) Letter of intent and acceptance for appointment of a licensed investment manager/s; (c) Letter of intent and acceptance for appointment of a custodian; (d) For unrestricted funds and programmed withdrawal accounts, the draft product disclosure and key features statement to be provided to potential employers and individuals (e) Details and evidence of compliance with capital requirements to ensure that the applicant(s) has the financial strength and commitment to continue operations in the event of overly optimistic business forecasts and a sufficient capital buffer to meet losses arising from operational risks, including: i. A capital plan to support the operation of the administrator and operation of the unrestricted fund, programmed withdrawal account or umbrella fund as applicable. ii. Identification of the source of funds and proposed capital composition of the minimum paid up capital requirement 7.4. Part D: Certification The application must include Form PLR F12 - Certification of applications by a company. 8.0 SUPPORTING DOCUMENTS Further to the licensing requirements for administrator of pension funds and pension services company, an applicant must also submit certified copies of the following documents; (a) Certificate of Incorporation (b) Memorandum and Articles of Association which must contain, among others, the following provisions:

PENSION AND INSURANCE SUPERVISION DEPARTMENT i. the sole objective being to conduct the business of pension fund administration or pension service company related services; ii. a provision precluding the administrator from trading on its own account or purchasing or selling pension fund assets to itself, shareholders, directors, employees, affiliates or other related party; and iii. a limitation on the issuance of any unissued share capital, rights issue, issuing preference shares or debentures by the administrator without prior written approval of the Registrar. (c) Shareholders’ register; (d) Share certificate for each significant owner (e) Operations manuals; (f) Letters of appointment and acceptance of Directors; (g) Minutes of pre-commencement Board meeting; (h) Letters of offer and acceptance of employment in respect of management team; (i) Charters or terms of reference for the Board and its committees, including sign off of Codes of practice for trustees; (j) Trust deed and rules for unrestricted fund or umbrella fund to be registered by the trustee and disclosure documents for programmed withdrawal account as appropriate. (These documents must be signed￾off by third party legal advisers that the trust deed, rules and disclosure comply with the requirements of the Financial Services Act, 2010, Pension Act 2010 and all supporting Directives, prior to submission of the application). 9.0 COMMENCEMENT OF OPERATIONS (a) Before commencement of operations the licensee must submit a commencement letter and obtain an approval from the Registrar who will then conduct an onsite visit to verify - i. If pension administration platform and other information and communication technology facilities are in place

PENSION AND INSURANCE SUPERVISION DEPARTMENT ii. readiness of various operating policies and procedures that will ensure an effective and efficient management of information (b) At commencement the applicant must submit a copy of the opening statement of affairs signed by the directors and appointed auditors of the company. 10.0 SUBMISSION Duly completed application form must be submitted with supporting documents to any of the following address: The Registrar of Financial Institutions Reserve Bank of Malawi Independence Drive PO Box 30063 Lilongwe 3; or The Director Pension and Insurance Supervision Department Reserve Bank of Malawi 10 Hannover Avenue PO Box 565 Blantyre. Tel: 01 820 444/299 Fax: 01 822 118 Email: pisu@rbm.mw These guidelines and relevant forms can be downloaded from the Reserve Bank of Malawi’s website: www.rbm.mw