On 17 March 2021, the Financial Services Tribunal confirmed that failure to timeously submit an actuarial valuation can result in the imposition of administrative penalties on a pension fund. The Financial Sector Conduct Authority (“FSCA”) may take into consideration the number of days that the pension fund was late in submitting the actuarial valuation when determining the amount of the penalty.
In Sodexo Provident Fund v Financial Sector Conduct Authority, Sodexo failed to file its actuarial valuation for the period 2007 to 2010 which was due to be submitted by 30 November 2015. The FSCA in determining the amount of the penalty took into consideration that the submission was made on 25 July 2019, 1333 days late.
In accordance with its powers under section 37(2) of the Pension Funds Act, 1956, as amended by the Financial Sector Regulation Act, 2017 the FSCA imposed a penalty for 205 days at the rate of R1000 a day. Sodexo, unhappy with this penalty applied for a reconsideration of this decision to the Financial Services Tribunal, on the grounds that:
- It had submitted the actuarial valuation on 18 September 2018; and
- The failure to submit the actuarial valuation timeously was that of Sodexo’s administrator and as such, the FSCA should have imposed the penalty on the administrator instead.
The Financial Services Tribunal dismissed this application on the grounds that:
- The purported submission referred to by Sodexo was an attachment of the actuarial valuation to a letter addressed to the FSCA on 18 September 2018 which fell short of the requirements outlined in Board Notice 149 of 2010 clearly outlining the procedure to be followed when submitting actuarial valuation reports; and
- There is no merit in the argument that the administrator should have been given a penalty as the duty to submit a valuation falls squarely in the responsibilities of the Fund and not the administrator. The administrator can only be penalised by the FSCA for non-compliance of its own obligations and not those of someone else.
Pension funds should make provision for redress in instances where an administrator is tasked to attend to the administration of the pension fund including the submission of reports to the FSCA and fails to do so. In these cases, the pension fund imposed with a penalty can then seek an indemnity from the administrator for breach of the service level agreement between it and the pension fund.