Negative media reports on pension funds worry BPS

08th March 2018
WORRIED: Peter Hikhwa, BPS Chairman Source:The Midweek Sun

 Botswana Pension Society (BPS) is worried by numerous negative reports about the pension industry.

Chairman of the BPS, Peter Hikhwa told at the 2018 annual Botswana Pensions Society conference last week that such negative reports make the industry look bad and reveal lack of good governance in some institutions within the sector.

“Governing bodies should always be aware of their fiduciary duties of duty, of care, utmost faith and integrity; among other things in order to safeguard against situations that may lead to poor governance or governance failures,” Hikhwa said.

Causes of poor governance that plagues the industry include; incompetence, ignorance, lack of capacity from leadership, as well as inadequate infrastructures and corruption. Speaking at the conference that was themed, “Pension Fund Governance in Africa: Challenges and Potential Solutions,” Permanent Secretary to the President and Chairman of the Botswana Public Officers Pension Fund (BPOPF), Carter Morupisi said now that funds have grown phenomenally, there is an express need for good governance, not only for the companies investing pension fund assets but for the funds themselves.

His concern is that lack of good governance often leads to undesirable results, such as members of pension funds retiring with minimal or no pensions at all. Managing Director of Investec, Martinus Seboni said that among other things that are required to build good governance and compliance are; strong leadership; robust governance framework; independent compliance function and enforceable policies with consequences for non-compliance.

Seboni further said leadership always sets the tone on governance, emphasising that it is the duty of senior management including; chief executive officers, chief operations officers and directors to endorse governance and compliance. His view is that pension funds need to ensure that compliance and risk responsibilities form part of the employment process to ensure that staff is also accountable for their actions.

“All staff are bound by their employment contracts to the Code of Ethics Policy, and any breaches are treated seriously and may lead to disciplinary action,” Seboni said.

Seboni however, said though potential clients always want to see that the company they are going to do business with has a well-embedded compliance function and are serious about governance, it is always difficult to get buy-in from business areas as they see compliance as an impediment to business. According to Seboni, it is therefore important to strike a balance between compliance and the business case.

“Our clients have compliance responsibilities and they want to know that we take our compliance responsibilities seriously,” he said. Seboni who was speaking on Building a Governance Culture in the Financial Services sector said there is a growing need for policies that will guard against lack of good governance and compliance. Among the policies that he believes are critical is the policy on Conflict of Interest. Conflict of Interest is a situation in which someone is or could be perceived to be unable to make a fair or impartial decision because they could be affected by the result.

According to Seboni, poor management of potential or actual conflict of interest could damage the reputation of the firm and the priority is to ensure that clients are not prejudiced by any conflicts.

Another critical policy to formulate is Fair Treatment of Clients. This ensures that clients can be confident that when they deal with fund managers they are treated in a fair and ethical way. The policy is important because the firm has a responsibility towards clients and has a duty to protect client and business information.

“We must manage any potential confidentiality breaches that may occur through normal business activities appropriately,” Seboni said. If this policy is not in place, the institution may be exposed to the risk of misuse of confidential information and internal information that could lead to reputational damage, as well as regulatory or legal action against the firm. Personal Account Dealing is another policy that fund managers are encouraged to formulate.

This is concerned with making trades for personal investment and is meant to protect clients from employees prioritising their own personal dealing over client trades, to protect employees from possible misuse of information gained from their employment, to safeguard the reputation of the firm, and to protect client’s interests.

Disclosure of Outside Interest policy involves any activity that is performed by an employee or an affiliate person outside of employee’s normal employment, for example; appointment as director or trustee or similar role, involvement in investment clubs or other investment related projects.

In addition, Provision of Receipt of Third Party Benefits policy is concerned with ensuring that employees do not influence and are not influenced by third arties including clients to act improperly through the provision or receipt of monetary or non-monetary benefits. “Dealing with people’s money requires trust, integrity and the highest levels of accountability,” Seboni said. The retirement funds sector contributes significantly to the economy of Botswana, with total assets to GDP ration of 44 percent in 2016.

Latest News

Newsletter Subscription

      Subscribe Now      

Website designed & developed by DigitalHorn © 2016