Rosemary Hunter, the deputy registrar of retirement funds, has launched a High Court application against the Financial Services Board (FSB), her employer, demanding the release of two reports relating to the FSB’s closure of thousands of dormant funds between 2007 and 2013, and the investigation of two grievances she lodged with the board about her boss, FSB chief executive Dube Tshidi.
The application against the FSB cites as respondents Tshidi, Abel Sithole, the chairperson of the board of the FSB, Jurgen Boyd, the former deputy registrar of retirement funds and now deputy registrar of collective investments, and Finance Minister Pravin Gordhan.
Hunter is calling on the FSB, or alternatively, Gordhan, to investigate her grievances that Tshidi engaged in a concerted campaign to terminate her employment, at great expense to the FSB.
The FSB has indicated it will oppose the application in the North Gauteng High Court and, as the matter is before the court, it is not commenting on Hunter’s allegations. National Treasury indicated that the finance minister has yet to decide how to respond to the application.
The application reveals a deep rift between Hunter and Tshidi, with Hunter claiming her attempts to investigate the closure of the dormant funds was met with resistance from him and other members of the FSB, which included attempts to frustrate the investigations she conducted and to terminate her employment.
Her affidavit refers to a disciplinary hearing held against her last year which, she says, after two days proved to be unsustainable, as well as an offer made to her in 2014 to pay her out for the remainder of her contract if she resigned, because the FSB regarded its relationship with her to be “irretrievably broken”.
Hunter’s contract as deputy registrar runs until August this year.
Shortly after her appointment in 2013, Hunter looked into the closure of the funds, many of which had been abandoned by their trustees when members and their savings were transferred to umbrella funds. The FSB and National Treasury wanted the dormant funds to be cancelled and the number of registered funds reduced.
A project dubbed the “cancellations project” was embarked on and retirement fund administrators spent millions of rands closing the dormant funds.
The Pension Funds Act requires the registrar to have proof to his satisfaction that a fund’s assets and liabilities have ceased to exist before he or she can deregister it.
The court application reveals that Hunter obtained legal advice from an advocate about how this requirement should be met before she embarked on investigations into whether the requirement had been met when the funds were closed.
Hunter says in her affidavit that resistance to her investigation of the cancellation of fund registrations “has led me to believe … that Mr Tshidi and/or other FSB employees and/or office bearers have personal interests in ensuring that defects in the conduct of the cancellations project are not exposed to the public and/or in protecting those responsible for such defects from being held to account”.
In July 2014, she says, in accordance with FSB policies and procedures, she reported to the FSB Board the “unlawful conduct by Mr Tshidi, other FSB employees, and possibly, external providers of services to the FSB” and “irregular expenditure incurred by the FSB in breach of the Public Finance Management Act”.
She alleges that the board failed to appoint an investigation into the deregistration of the funds and decided there was no merit to her allegations. Instead, it appointed retired Constitutional Court Judge Catherine O’Regan to investigate aspects of the matter, including the legal issue on which she had already obtained a senior counsel’s opinion.
O’Regan’s report was provided to Hunter on condition she sign a confidentiality clause.
Hunter states in her affidavit that she considered it “unconscionable” to sign the non-disclosure undertaking, as it would have prevented her from complying with her legal duties.
The affidavit also reveals that, on O’Regan’s recommendation, forensic auditors KPMG were appointed to investigate a sample of 520 funds of the about 6 000 that were closed.
This investigation took place last year and, according to Hunter’s affidavit, she was informed by KPMG that the investigation revealed that most of the funds were closed without adequate information to satisfy a reasonable person that the assets of the funds had been disposed of in a way that protected the rights of the members and beneficiaries.
Hunter says she fears it is probable that members and beneficiaries of a significant number of the funds that were deregistered may have been unlawfully deprived of retirement fund benefits.
The KPMG report is the second report Hunter is demanding be released to her.
In a statement responding to questions from Personal Finance about Hunter’s application, the FSB said there was no activity in the deregistered funds, nor were there boards of trustees to manage them. The funds, however, still required regulatory attention, with no or very limited benefit to members.
All assets found in the funds were transferred to unclaimed benefit funds, where they can still be claimed by their rightful owners, the FSB says.
It also says that most of the deregistered funds were underwritten by assurers.
The FSB says its board remains committed to the highest standards of corporate governance and has taken all reasonable steps to address any concerns that have been brought to its attention.
Hunter first publicly revealed her concerns about the fund closure process at the Pension Lawyers’ Association annual conference in 2014, when she announced that the FSB would investigate the way in which the funds were closed and would reopen those funds where it had reason to believe members had been prejudiced.