Regulatory Alerts2018-03-31
Circular Letter 2: Utilisation of Demutualisation Share Proceeds
The South African Financial Services Board issued this circular to address the illegal or erroneous use of demutualisation share proceeds by certain pension funds in violation of the Pension Funds Act and fund rules. Citing Section 5(1) of the Act, the Registrar mandates that all fund assets belong exclusively to the registered body corporate and requires defaulting trustees to disclose the misappropriated amounts and submit repayment plans. Affected boards must formally explain their defaults to the Registrar, while independent auditors will be instructed to verify and report on the corrective actions taken.
# FINANCIAL SERVICES BOARD
Rigel Park 446 Rigel Avenue South Erasmusrand Pretoria South Africa
PO Box 35655 Menlo Park Pretoria South Africa 0102
Tel (012) 428-8000 Fax (012) 347-0221 e-Mail info@fsb.co.za
Int +27 12 428-8000 Int +27 12 347-0221 Toll free 0800110443
Internet: http://www.fsb.co.za
Enquiries: MR D TSHIDI D. Dialling No.: 012-428 8068
Our ref: 12/12/1 Fax: 012-347-0221
Date: 2 September 1999 e-mail: dubet@fsb.co.za
## CIRCULAR LETTER 2
(To all self-administered funds, all fund administrators, and the administering insurers of funds exempted in terms of section 2(3)(a) of the Act)
## UTILISATION OF THE PROCEEDS OF DEMUTUALISATION SHARES
It has come to the attention of the Registrar of Pension Funds that there are some funds/trustees which have either illegally or erroneously utilised the proceeds of the demutualisation shares in ways that are inconsistent with both the Pension Funds Act and fund rules.
Section 5(1) of the Pension Funds Act provides that upon registration a fund shall become a body corporate capable of legal acts including ownership and control of the business of the fund. All the assets, rights, liabilities and obligations shall be deemed to be those of the fund to the exclusion of any other person. No person shall have any claim on these assets or rights except where a claim arises in connection with transactions relating to the business of the fund. Examples of these claims would be things like administration costs, payment of withdrawal, retirement or death benefits which are spelt out in the rules of the fund.
The Registrar urges the boards of management of those funds which have defaulted to come forward and inform him of why they defaulted and how the proceeds will be paid back into the fund. The amounts involved must be disclosed. Your auditors will also be requested to report on the matter.
PF Circular 104 which was issued in August 1999 deals extensively with the handling of the demutualised shares and copies of this document are still available.
**J P ISHIDI**
REGISTRAR OF PENSION FUNDS
Board Members: W J Haslam (Deputy Chairman) C C Dance G K Morolo Mrs H Wilton
Executive Officer: R G Cottrall
F:\USERS\MINNETTE\OMSEND\CIRCULAR LETTER 2.wpd MINNETTE
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