Madam Chair and hon members, the world we live in today, the so-called global village, has seen a proliferation of financial services and institutions of all types. In fact, these account for major transactions and flows of capital which have a large impact on the direction of economic activity globally.
Thus, it becomes important to ensure that our regulatory regime can cope with the dynamism of today's world, while at the same time protecting our people's interests. These particular amendments are not of major consequence, but serve to clarify certain aspects of the principal Act and to regularise, through legislation, certain practices.
Firstly, through these amendments we create a hierarchy of decision-making that clarifies the relationship between the board and the executive of the FSB. Secondly, we seek to describe more simply and clearly the functions of the board, so that instead of supervising the exercise of control, the board will supervise compliance with laws regulating financial institutions and the provision of financial services. Thirdly, the FSB will now, as part of its work, engage in consumer education which is particularly important in the South African historical context of inequitable access to information, financial institutions and markets generally. Fourthly, the amendments relieve the President of the function that relates to the appointment of members of the board, which is now to be exercised by the Minister of Finance, as the FSB falls under him and as he already exercises other functions such as the appointment of the executive of the FSB and members of the board of appeal. Fifthly, we expand the representation of the executive committee to include administration and finance.
We also make it obligatory for consultation with the financial services industry before imposing levies through which the FSB activities are funded. Other amendments do the following: they streamline procedures that relate to consultation between the Minister of Finance and the board and the executive. They also relax the secrecy provision of the FSB somewhat by making it possible for it to exchange information with other local regulators and self-regulatory bodies and to assist foreign regulatory and supervisory authorities, provided that it is not against the public interest. They also redefine limitation of the FSB's liability incurred in the course of the performance of its functions to make it clear that gross negligence will not be tolerated. We also regulate, through these amendments, the use of the logo of the FSB.
Importantly, however, we make changes to the composition of the board of appeal. Previously, one member of the FSB board needed to serve on the board of appeal.
We have seen this as possibly in conflict with the Constitution, in that the board member may have been directly or indirectly a party to a decision on which an appeal has been noted. The board of appeal will now be constituted by a lawyer, an accountant and a party acquainted with the financial services industry, all of them having wide experience and expert knowledge of their fields of expertise.
Provision is also made for alternate members to be appointed to each of the members of the board of appeal, as well as the co-option of an assessor to assist the board if that should be deemed necessary. The noting of an appeal will not have the effect of suspending the registrar's decision, with the proviso that the board of appeal may on the application of an interested party, direct otherwise. Possible orders which the board of appeal may issue have been extended to include a referral back to the registrar, as well as an order of costs in accordance with the procedures of the High Court. These are all the amendments that we are effecting to this Bill, through which we really intend to improve the legislation. [Applause.]
Order! Hon members, before we proceed, I would like to note the return of Boyce Willem. He is back in his seat, and we welcome him back to the House after a long period of recuperation following a car accident. We are very pleased that you are back, safe and sound, hon member. [Applause.]
I also note that our next speaker, Ms Mahlangu, was in fact herself involved in an accident recently, if I am not incorrect. I urge all members to really ensure that we drive safely and really take care on the road. We are glad, hon member, that you are safe.
Chairperson, I think your remarks are really welcomed, but I also think that the Arrive Alive Campaign must also make sure that other motorists drive safely on the roads, so that they should not cause accidents and create problems for people like me.
Deputy Minister of Finance and hon members of this august house, the Financial Services Board Amendment Bill seeks to bring technical amendments which are of a substantive nature to the principal Act. The Financial Services Board is an independent statutory body established by an Act of Parliament, namely the Financial Services Board Act, 97 of 1990. The board supervises the South African nonbanking financial sector, which, amongst others, includes insurance companies, asset management and so on.
The Financial Services Board's mission is to promote sound, efficient financial institutions and services, together with mechanisms for investor protection. The Financial Services Board is accountable to the Minister of Finance. The purpose of the Bill before us is to correct and improve various aspects of the Financial Services Board, its structure and its functioning - to correct various provisions and delete others. The existing Act uses words like ``supervision'' and ``supervise'' on a number of occasions to describe the relationship between the executive officer and the Financial Services Board. This implies that the board controls the activities of the executive officer. The executive officer is also the registrar in terms of the regulatory laws, which imposes obligations on the executive officer as the registrar.
The present Act implies that the board has to approve all decisions made by the executive officer. In this light the approach adopted by the Bill we are seeking to approve today is that words like ``supervise'' and ``supervision'' should refer to three tiers of decision-making, as the Deputy Minister has indicated.
This being the first level of significant decisions which the board has to approve, the second level of decision-making is where the executive officer must make decisions within guidelines set by the board. The third level - which is of less significant decisions - is where the executive officer can make his or her decisions without any consultation. Since the board cannot confirm every minute decision, the separation of decisions into various categories allow for significant decisions to be taken under close supervision, less significant decisions to be taken within guidelines and routine decisions to be taken freely without any consultation again.
Secondly, section 3 of the current Act states that the board should exercise control, in terms of any law, over the activities of the financial institutions and over financial services. This is not correct as the board does not exercise such control. The Bill before us is trying to state unambiguously that the board is to supervise the compliance, within the financial regulatory laws, of those parties to whom these laws apply.
The committee had a very lengthy discussion over one of the new functions of the board, that is, investor education. The committee was very happy with the inclusion of investor education. This will help ordinary people to know and understand which products they are getting themselves into and what services they are entitled to as ordinary South African citizens as it relates to their investments and other things. We also welcome the idea of the helpline because it is also going to help people to be further able to consult the Financial Services Board from time to time. The existing Act also prescribes that the President appoints a member of the board. The Deputy Minister has spoken about the issue that it was an unnecessary burden on the President. Therefore the Bill seeks to make sure that the Minister of Finance performs this function.
Lastly, in terms of the present Act, the board has the right to impose levies on financial institutions and it is not required to adopt a consultative approach in this regard. But the Bill before us today provides for a compulsory consultative process prior to imposing levies if this is necessary. This is in line with upholding the democratic values and principles of our Constitution that are giving people the right to comment on issues that will affect them such as the imposition of levies and so forth. Therefore the select committee is convinced that the Bill and the amendments that are brought before us are correct, and we ask that the House supports the Bill.
Mevrou die Voorsitter, Adjunkminister en agb lede, die Raad op Finansile Dienste is 'n onafhanklike statutre instelling wat ingevolge die Wet op die Raad op Finansile Dienste van 1990 gestig is om toesig te hou oor die Suid-Afrikaanse finansile dienstebedryf buite die banksektor. Die raad, wat verantwoordbaar is aan die Minister van Finansies, is reeds die afgelope nege jaar in werking, en het in di tyd plaaslik en internasionaal respek verdien vir die rol wat hy in die gladde, doeltreffende en mededingende finansile dienstebedryf speel.
Sedert 1990 het dit egter nodig geword om sekere wysigings aan die wet aan te bring. Die voorgestelde wysigings is tegnies en nie van besondere gewigtige aard nie, en is hoofsaaklik gerig op die opheldering van sekere van die hoofwet se aspekte wat daagliks in die raad se werksaamhede ter sprake kom.
As voorbeeld kan genoem word dat die woorde ``toesig'' en ``toesig hou'' op verskeie plekke in die wet gebruik word, en aangesien daar in die gemenereg 'n bepaalde betekenis aan di woorde geheg word, sou dit vertolk kon word as sou die raad die uitvoerende beampte se werksaamhede beheer en al sy beslissings moet goedkeur.
In hierdie wysigingswetsontwerp word die woorde ``toesig'' en ``om toesig te hou'' omskryf om te verwys na betekenisvolle beslissings wat die raad moet goedkeur, na beslissings wat die uitvoerende beampte moet neem binne die riglyne wat deur die raad gestel word en na minder betekenisvolle beslissings wat die uitvoerende beampte self kan neem.
Nog 'n belangrike wysiging wat ingevoer word, is 'n nuwe funksie, naamlik die bevordering van finansile instellings se programme en inisiatiewe wat op die opvoeding van verbruikers gerig is. Hierdie ontwikkeling, wat in die toekoms 'n ho voorkeur in die raad se werksaamhede sal geniet, word wyd verwelkom.
Die wysiging waarvolgens die President se funksie by die keuring en aanstelling van die lede van die raad na die Minister van Finansies verskuif word, is reeds vroer deur die Nuwe NP bevraagteken, alhoewel dit slegs semanties is aangesien effektiewe beheer oor die aanstellings reeds vir alle praktiese doeleindes in die hande van die Minister van Finansies is.
Dit is egter 'n saak van beginsel aangesien vele kundige persone wat met groot vrug in die raad sou kon dien, deur hierdie wysiging daarvan weerhou sal word om hulle vir hierdie diens beskikbaar te stel aangesien hulle maatskappye se aktes van oprigting politieke betrokkenheid verbied, en 'n aanstelling deur 'n Minister as politieke betrokkenheid beskou kan word.
Die President daarenteen is die staatshoof, en aanstellings deur hom geniet ho status en kan kwalik deur enigeen geweier word. Dit sal trouens met groot eer aanvaar word. (Translation of Afrikaans paragraphs follows.)
[Dr E A CONROY: Madam Chairperson, Deputy Minister and hon members, the Financial Services Board is an independent, statutory institution which was established in terms of the Financial Services Board Act of 1990 to supervise the South African financial services industry outside the banking sector. The board, who is accountable to the Minister of Finance, has been operational for the past nine years, and has in this time earned local and international respect for the role it plays in the smooth, efficient and competitive financial services industry.
However, since 1990 it has become necessary to effect certain amendments to the Act. The proposed amendments are technical and not particularly significant, and are primarily aimed at the clarification of certain aspects of the principal Act which are at issue daily in the deliberations of the board.
An example would be the words ``supervision'' and ``supervise'' which are used in several places in the Act, and since these words have a specific meaning in common law, they could be interpreted as meaning that the board controls the functions of the executive officer and must approve all his decisions.
In this amending Bill the words ``supervision'' and ``supervise'' are defined as referring to significant decisions that the board must approve, decisions that the executive officer has to make in accordance with the guidelines set by the board and less significant decisions which the executive officer may make on his own.
Another important amendment which has been introduced is a new function, namely the promotion of financial institutions' programmes and initiatives aimed at the education of consumers. This development, which will enjoy a high priority in the future functions of the board, is widely welcomed.
The amendment according to which the function of the President concerning the selection and appointment of the members of the board is shifted to the Minister of Finance, has already been questioned by the New NP, although it is a question of semantics, because efficient control of the appointments already rests, to all intents and purposes, in the hands of the Minister of Finance.
However, it is a matter of principle, because many experts who could have been a great asset to this board, will be prevented by this amendment from making themselves available for this service, because their companies' memorandums of association forbid involvement in politics, and an appointment by a Minister could be considered to be involvement in politics. On the other hand, the President is the head of state, and appointments by him enjoy high status and can hardly be refused by anyone. As a matter of fact, it will be accepted with honour.]
Furthermore, the number of members of the executive is being expanded, a process of consultation with the industry before levies for the funding of the financial services industry are proclaimed is being introduced, a new clause is being inserted to streamline the procedures for continual consultation with the Minister, the FSB secrecy provision is slightly extended to enable it to exchange information with other local regulators and self-regulatory bodies and the limitation of the FSB's liability incurred in the execution of its functions is being redefined to make it clear that gross negligence will not be excused.
The Bill has no organisational, human resources or financial implications for the state and is, despite the reservations mentioned earlier in respect of the appointment of board members, supported by the New NP.
Chairperson, hon Deputy Minister and hon colleagues, at the outset, I want to state categorically that the DP supports this Bill. To us in the DP good supervision of the financial sector is of critical importance and therefore we support this Bill.
The Financial Services Board Amendment Bill deals primarily with a large number of technical amendments applicable to the operations of the Financial Services Board. Improving the operations of the Financial Services Board could only be positive and therefore we support these improvements. The Financial Services Board, or the FSB, as it is commonly known, plays an oversight role in respect of participants in the financial services industry other than banks or mutual banks, which are controlled by the Banks Act, Act 94 of 1990, or the Mutual Banks Act, Act 124 of 1993.
The oversight roles that the FSB has over insurance and investment companies are of critical importance to the ordinary man in the street. We all have short-term and long-term insurance and we all invest in our pension schemes. We trust that the FSB will ensure that our financial investments will be financially well managed for our long-term wellbeing.
The most important issues of the Financial Services Board Amendment Bill are covered in clauses 1 and 2 of the Bill and relate to the refining of the nature of the supervision which the board has to carry out. There was uncertainty as to the precise nature of the supervision required, which was highlighted by some court judgments.
There are some bodies which are not happy because they believe that the board, as a whole, may take over the many functions currently performed by the registrar as designated in a number of the Acts governing the financial services industry. In practice, however, the executive officer of the Financial Services Board is also the registrar in terms of the various Acts, and it does not therefore seem illogical that he or she should have guidelines laid down by the Financial Services Board. The amendments with regard to the supervision were supported by all the parties in the select committee and we also support these supervisory aspects.
The new three-tier approach to decisions is also welcomed by the DP. At the first level, that of significant decisions, the board has to approve the decisions. At the second level, the executive officer makes decisions within guidelines set by the board. At the third level, that of less significant decisions, the executive officer can make his or her own decisions.
'n Verdere belangrike aspek van die nuwe Wysigingswetsontwerp op die Raad op Finansile Dienste vind ons in klousule 2 van die wysigingswetsontwerp, wat die volgende paragraaf by artikel 3 van die hoofwet invoeg:
Die werksaamhede van die raad is om -
Programme en inisiatiewe deur finansile instellings en liggame wat die finansile dienstebedryf verteenwoordig om gebruikers en potensile gebruikers van finansile produkte en dienste in te lig en voor te lig, te bevorder.
Hierdie is nuwe inisiatiewe waaroor die DP verheug is. Ons sien baie uit na hierdie programme en inisiatiewe wat die raad kan loods om verbruikers in te lig. Vandag is dit uiters noodsaaklik vir enige organisasie om verbruikersvriendelik te wees, en hierdie is 'n positiewe ontwikkeling.
Hierdie aspek is ook bespreek in die gekose komitee en ek het toe reeds lede van die raad wat daar was daarop gewys dat dit nie nodig is om die wiel weer te herontwerp nie. Baie universiteite en technikons bied reeds programme in hierdie verband aan wat van groot hulp kan wees om hierdie programme en inisiatiewe te steun.
Dit sal vir die gebruikers van hierdie produkte en dienste van onskatbare waarde wees om baie goed ingelig te word voordat enige geld bel word. (Translation of Afrikaans paragraphs follows.) [A further important aspect of the new Financial Services Board Amendment Bill is to be found in clause 2 of the amending Bill, which inserts the following paragraph into section 3 of the principal Act:
The functions of the board are to -
(c) Promote programmes and initiatives by financial institutions and bodies representing the financial services industry to inform and educate users and potential users of financial products and services.
These are new initiatives about which the DP are delighted. We are very much looking forward to these programmes and initiatives that can be launched by the board to inform consumers. Today it is absolutely essential for any organisation to be consumer-friendly, and this is a positive development.
This aspect was also discussed in the Select Committee and already at that stage I pointed out to members of the board who were present that it was not necessary to reinvent the wheel. Many universities and technikons are already presenting programmes in this regard, which can be of great assistance in supporting these programmes and initiatives. It will be invaluable to the users of these products and services to be very well informed before any money is invested.]
In conclusion, as hon members could have deduced by now, the DP feels positive about this legislation and therefore we support it. We will definitely take part in the oversight role that we have over these bodies and hope to play a positive role to ensure that the consumers out there will get good financial products and services to ensure them a good and prosperous future. [Interjections.]
Chairperson, hon Deputy Minister of Finance, hon permanent delegates of this House and all special delegates who are here today, before I start, I wish to indicate that it is the first time that all parties have agreed, without any reservations, to all the amendments that we have made thus far. I think it is good and commendable on their part to at least acknowledge that there is some good in what we are doing.
Act 97 of 1990 states that the Financial Services Board must regulate and supervise the South African nonbanking financial services industry. This, by its very definition, is a mammoth task for a statutory body like the FSB. It is an important task which the FSB must carry out with diligence, honesty, fairness and, above all, integrity. Those responsibilities which fall within the ambit of the FSB contribute in a major way to our country's economy, thus also playing an important role in the economic growth and sustainable development of our country, which is the agenda that we have set for ourselves.
It is also important to know that, through the Financial Services Board's daily operations, we can either build or destroy investor confidence in our country and therefore it requires from us as public representatives to ensure that the FSB is above corrupt practices and other matters which might affect the FSB negatively.
The regulatory functions of the FSB as entrusted to the registrars of insurance, friendly societies, pension funds, unit trust companies, stock exchange and financial markets are an indication of the importance of the existence of such a body as the FSB to ensure that there is fair and honest competitiveness within these institutions.
Concerning the amendments themselves, I am particularly pleased that the Bill before us makes the promotion of investor education obligatory for the Financial Services Board. We, as members of this House, conveyed the concerns and interests of our constituencies when scrutinising this Bill. Our constituencies feel helpless when it comes to dealing with financial institutions, especially those in the nonbanking sector such as the long- term insurance industry and the stock exchange. This is not surprising, as a large percentage of our population is illiterate and the intricacies of investments and share trading confuse even the most educated members of our communities.
Therefore the protection of individuals from fraudulent insurance salespeople, fund managers and unethical insurance brokers is also a mandate of the Financial Services Board. We, as members of this House, view the education of the public about the proper conduct of financial institutions as being very central to the objectives of our national Constitution.
Other objectives of the Bill are that provisions with regard to the pension rights of officers and employees that were transferred from the Public Service to the Financial Services Board are repealed as they are no longer necessary. The secrecy provision regarding information obtained by the Financial Services Board is relaxed so as to allow the Financial Services Board to provide information and assistance to other regulatory authorities, local as well as abroad. This clause, together with the provision on indemnity in respect of performance of functions by certain persons and bodies, will aid our campaign against money laundering and corruption, and facilitate the implementation of the Insider Trading Act, which was passed by the previous Parliament.
This Act makes it illegal to profit from any information on the trading of shares on the stock exchange which is not available to the public. The work currently done by the Financial Services Board with regard to prosecuting beneficiaries of insider information and/or compensating victims of insider information is commendable and unprecedented in the history of share trading in this country.
The Financial Services Board Amendment Bill before this House enjoys the support of the ANC because we are convinced that the functions of the Financial Services Board will be enhanced through these amendments.
I wish to inform the House that the ANC wholeheartedly supports the amendments as presented before the House.
Chairperson, may I say that I agree very much with the hon member who has just sat down in his comments - hich were also raised by the chairperson of the select committee - on the whole question of investor education. Nothing can, in the long term, be more important to our economic future than that kind of effort, not only there, but elsewhere in society.
I wish to refer to clause 3 of the Constitution - and I am glad that the New NP feels the same as we do: We feel that the situation where the Minister replaces the President in appointing the Financial Services Board is wrong. It is far more than being purely technical, as it is pretended that the Minister does it anyway. We know how it works: Ministers do make recommendations, but we believe it to be a mistake for several reasons.
Firstly, the board members will be seen as placemen for the Minister - which, indeed, they will be. Secondly, the presidential appointments carry much more weight and can, therefore, attract a far higher calibre of person. The people themselves will be and will feel more independent when differences arise with the Ministry. By allowing the Minister to appoint the board, the legislation Finlandises the board.
I know many companies - and have been on the Board of some of them - where the very senior people in the company will not accept a ministerial appointment, but will only accept a presidential appointment. The more junior people will then go to the ministerial appointments further down the line and other appointments to various statutory bodies.
The Financial Services Board is one that should be rigorous, independent and have the highest calibre of person serving on it. Indeed, as I have said that some companies will not allow a person to serve because when one accepts a ministerial appointment, it is taken as a political appointment whereas if it is a presidential one, it is seen as nonpolitical. This is because the President appoints people wearing two hats, one for political and the other for nonpolitical appointments. So, there are companies which are precluded from accepting such appointments.
The second thing I would like to raise with the Minister is the question - which I am disappointed about, and was mentioned in his speech - of ombudsman for the financial services sector. It is an urgent priority that such an ombudsman should be appointed and, in my view, have statutory powers. We should be doing something about it, particularly now that the banks are moving into microlending - Standard Bank has just bought a microlending company meaning that it is moving into microlending and the other big banks will probably move in that direction as well. I am very pleased that they are, because some people in the microlending industry should not be in the business at all. The industry will have to be far more responsible as the big banks get involved.
But the need for an ombudsman is clear, because it will save millions in legal costs - the ombudsman could be funded by the industry itself. This will allow problems to be dealt with quickly, fairly and inexpensively, and there are no financial implications for the state. I really would ask the Minister, if he is not already doing so, to give it his urgent attention.
I also want to raise the question of microlending, which again affects the Financial Services Board directly. This microlending industry frightens me. I sat in my car in my village where I live, and watched people going into a microlending agency. I know the people - shepherds; simple and fine people. These people are like putty in the hands of microlenders, who take their IDs and whatever surety these poor people can offer.
The excellent name which our financial services sector has built in South Africa over a hundred years and longer is being squandered by these loan sharks that we very often find in these villages.
Order! Hon member, your time is up. In fact, I gave you an extra five seconds because you were talking about something of very great importance.
Madam Chair, I would like to thank all hon members for supporting the Bill that we are dealing with. I must say that I am sorry that I may not have heard some of the concerns that were raised by Dr Conroy, because I was battling with the hearing aid, as he was speaking Afrikaans. Therefore, I may have missed some of the concerns that he has raised.
On the question of the role of the Minister of Finance, raised by Mr Durr, I would imagine that if we hold the Minister of Finance accountable, we have to give some role to the Ministry in terms of determining the area over which he has responsibility. He also has some role in determining who are the people who play a role in the institutions that carry out work on behalf of the Minister of Finance. I am sure that, in the environment that exists in South Africa today, we should not particularly be harbouring worries about people appointed by a Minister not being able to differ with the views of the Minister. Therefore, I believe that this is really a matter that enables the streamlining of all the work that is involved in putting together all the structures of the Financial Services Board.
I take the points Mr Durr raised concerning the question of an ombudsman for the financial services sector, and I hope it is something over which we will, perhaps, someday come back to in the House, because at the moment I am not certain what sort of work is being done in that regard. However, one will hope that, in due course, we can, perhaps, come back to the House and give an indication of what direction we are moving in.
On the question of microlenders, of which I am very sorry that he could not finish his point, that is really a matter of critical concern. In a sense, it is an anomaly of the South African society. It is a combination of many things. It is a reflection of our history and of our past, where access to financial services was a problem. But it is also a reflection of the current economic situation in our country. We are undergoing major changes in the economy, and these are exerting various pressures on people's incomes, and so on. But, indeed, it is a serious issue. The conduct of a ... [Interjections.]
Madam Chair, can I ask the Deputy Minister a question?
Order! Are you prepared to answer a question, hon Deputy Minister?
Yes, Madam Chair.
Order! Yes, hon member, you can ask the Deputy Minister a question.
I just want to say to the Minister that had I been able to complete my speech, I would have said that. However, is he of the opinion that the control of the Usury Act and microlending should be transferred from the Department of Trade and Industry to the more appropriate Financial Services Board? For a start, with the Standard Bank, for example, entering microlending, one is going to have dual control. The Financial Services Board are going to be regulating some aspects of their businesses, and Trade and Industry the others.
Order! You were supposed to ask a question, and not to make a speech.
Madam Chair, yes, that is a fair question. Mr Durr should know that there are a number of areas where one finds that regulation in South Africa is actually scattered over a number of different departments. This creates a problem. One of the debates that are going on at the moment is about how we can try to consolidate regulation. Of course, one of the debates that are taking place is whether we should not establish what one can call a super-regulator! In other words, establish a comprehensive and consolidated regulatory board or authority, which will resort under one department.
Currently we have some regulatory bodies accountable to the Department of Trade and Industry and the Department of Finance, and others to the Reserve Bank. So there is a debate that is going on around consolidation. It is an ongoing debate amongst Finance, Trade and Industry, the FSB and the SA Reserve Bank, and I am sure that in due course, that is once we have taken those discussions to a certain point, we will be able to inform the House as to the direction in which we are moving.
This was really to make the point that the question of microlenders is a matter of great concern, and we hope that we can, at least, remove some of the negative aspects of the microlending industry.
Of course, Mr Durr is correct when he says that banks are actually moving into the microlending sector. I think Absa was the first, and I hear that Standard Bank has also done the same. We would simply hope that this would actually go some way in ensuring that banks themselves extend services which previously they did not extend to certain sectors of the community.
I would like to thank all members. [Applause.]
Debate concluded.
Bill agreed to in accordance with section 75 of the Constitution.
Business suspended at 11:23 and resumed at 14:01.
Afternoon sitting