What is Directive 8 all about?
Directive 8, which looks at accepting gratification, has been widely discussed in the retirement industry – especially it’s breadth of scope and how it will impact fund officials.
According to an article in the latest FCSA Bulletin, the Registrar of Pension Funds views the following, among others, as gratifications: money, donations, gifts, loans, fees, rewards, valuable security, property or interest in property; any forbearance to demand any money or money’s worth or valuable item; and any payment, release, discharge or liquidation of any loan, obligation or other liability, in whole or in part.
The directive – issued as part of the FSCA’s supervisory approach to ensure retirement funds are properly managed, and prescribed to pro-actively combat corruption – is based on the principle that a board member, principal officer, employee of a retirement fund, auditor, valuator, administrator, employee of an administrator, or service provider to a retirement fund should not be involved in any conduct constituting corruption or corrupt activities. Such involvement will question his/her fitness and propriety to hold office and/or to provide a service.
Types of gratification not permitted include:
- Any gratification, which when objectively viewed, creates a conflict of interest with the recipient’s fiduciary duty towards the fund;
- Token gifts that exceed the annual limit set by the board. This limit may not be more than R500 per annum in aggregate from any one service provider;
- Any gratification relating to local or international due diligence, including but not limited to subsistence, travel or accommodation;
- Any gratification relating to local or international entertainment or sporting events, including but not limited to subsistence, travel or accommodation; or
- Conferencing costs or board of fund expenses.