Last month the Constitutional Court dismissed the appeal by Rosemary Hunter to have further investigation take place into the pension funds cancellations project that was managed by the Financial Services Board (FSB) – now the Financial Sector Conduct Authority (FSCA) – between 2007 and 2013. Hunter is a former deputy executive officer of the FSB who halted the project when she identified that the cancellations were potentially unlawful.
The matter has been before the courts since Hunter first approached the High Court in early 2016. She has doggedly pursued the case, even though she has lost in every instance.
Unfortunately, in the course of this litigation, there has been a lot of misunderstanding about what is actually at issue. Hunter quite understandably gained a lot of sympathy as a proverbial ‘David’ in a fight against a ‘Goliath’. This has, however, obscured the facts of the case.
However admirable her intentions, and however brave her fight, it is wrong to assume that Hunter must have been correct about everything simply because of her situation. Unfortunately, most of the commentary on the case has fallen into that trap.
Mistakes were made
What Hunter wanted, and was quite right to expect, was that the FSB should investigate the cancellation of the thousands of funds that had been deregistered in the course of the project. This is because she believed that the process was legally flawed and that mistakes had been made that could prejudice investors.
She was absolutely correct about this. Retired judge Kate O’Regan conducted the first investigation into the matter and concluded that the registrar may have assumed powers that he legally did not have.
The second investigation, conducted by KPMG, found reason to believe that many funds had been cancelled when in fact they still had assets. The third investigation, conducted by pension fund lawyer Jonathan Mort, identified a number of funds where this was indeed the case.
The FSCA, therefore, can’t dispute that mistakes were made – and the reality is that it has never tried to.
Hunter’s case before the courts has unfortunately relied on her belief that the FSB was trying to hide something. Initially, she even made accusations of corruption and of a conspiracy to prevent a proper investigation. However, she never presented any evidence for this and, by her own admission never had any. No facts supporting this claim have been uncovered
While it’s true that the investigations would probably not have taken place without Hunter’s intervention, the fact remains that they did take place. When the regulator was presented with serious concerns, it had them looked at. Three separate independent investigations can hardly be called a cover-up.
This is exactly what the Constitutional Court found:
“The FSCA has not only recognised and discharged its duty to investigate whatever is worthy of an investigation, but administrators have also embarked on the responsible exercise of ensuring that the interests of the admittedly vulnerable pensioners are not compromised,” Justice Sisi Khampepe wrote in the majority judgment. “Crucially, public sector functionaries too deserve the space to carry out their duties free from outside interference that virtually amounts to unintended micromanagement. It ought to be enough that they have done what is reasonably necessary to achieve a process that would potentially yield a credible, transparent, inclusive and unbiased outcome. And this, they have done.”
This is, and always was, the only matter of substance in this case. Hunter believed that the cancellations project should be thoroughly investigated. The regulator, however, never shied away from doing so. So, in fact, Hunter was always asking for something that was already happening.
However, this all got lost in personal acrimony and the severe mistrust that developed between the two parties. This clearly came out in the court papers at various stages.
Both sides handled this extremely poorly, although more blame should be apportioned to the FSB in this respect since it did itself no favours in the way it treated Hunter.
However, as National Treasury stated in its official response to the judgment: “Given the legal complexity of this case, and contrary to a media campaign supporting the applicant, it is important to note that this case was not about issues of corruption, malfeasance, whistle-blowing or unclaimed benefits.”
It was about whether a proper investigation into the cancellations project had taken place. And, as the court found, it had.
It’s also important to note that as laudable as Hunter’s questioning of the cancellations project was, she wasn’t the first person to identify errors.
“The reinstatement of cancelled funds did not start with the Hunter case,” Olano Makhubela, divisional executive for retirement funds at the FSCA, told Moneyweb. “The FSB and industry always acted on the understanding that a fund will be considered for reinstatement where it transpired later that it was deregistered in error.”
Liberty, which administered 80% of the cancelled funds, had been discussing this issue with the FSB for some time before Hunter’s appointment.
Since the start of the cancellations process in 2007, 108 funds have been reinstated through various processes. Liberty intends asking the High Court to reinstate a further 65.
It’s worth appreciating that, in total, this represents 1.6% of the total of 6 757 funds cancelled.
And while the investigations are now complete, the regulator is not simply moving on.
“Even though the FSCA is satisfied with the outcome of the judgment, we also acknowledge that there is room to improve the process of cancelling and regulating funds,” says Makhubela. “To address some of the concerns raised in the Constitutional Court judgment, the FSCA is considering requesting all administrators and funds which requested cancellations to check and verify that no cancelled fund had assets, with random spot checks from the FSCA.”