SOUTH AFRICA - The Financial Services Board (FSB) has warned pension fund administrators the practice of bulking is unlawful and has threatened to conduct formal inspections.
The FSB said the practice of administrators consolidating credit balances of pension fund bank accounts under its control, thereby procuring a higher rate of interest from the bank, and not yielding all of it to the funds could be “widespread” in the country.
In a circular titled ‘secret profits by pension fund administrators’, the FSB went on to describe the practice as “an improper benefit or perquisite gained by administrator at the expense of the funds under management, and without disclosure being made to all funds”.
The board deemed it necessary to investigate the matter thoroughly, and warned it would conduct formal inspection into administrator’s affairs “if necessary”.
The FSB called on administrators to make full and frank disclosure to them regarding the practice, and added: “Administrators are required by law to observe the utmost good faith, to exercise proper care and diligence, to refrain from gaining directly or indirectly improper advantage for themselves to the prejudice of their principals and avoid conflicts of interest”.
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