Financial Services Board: DA calls on Minister of Finance to investigate irregularities

The Democratic Alliance (DA) calls on the Minister of Finance to immediately suspend Mr Dube Tshidi as Executive Officer of the Financial Services Board (FSB) and to subject the activities of the FSB to an investigation.

Starting in 1980, many defined benefit pension funds converted their funding structures to defined contributions. During the conversion process, and in several other circumstances, the surplus was "stripped" out of the fund. The consequence was that millions of pension fund members, in addition to acquiring investment risk subsequent to conversions, did not receive the full value of their pension fund asset, and thus received, or will receive when they retire, a lower pension benefit.

Legislation was subsequently enacted to retrospectively address instances where employers had stripped the surplus and retained it or where the fund had been closed and the surplus distributed amongst a few select remaining members.

The FSB has, for a number of years, attempted to ensure that surplus distributions of funds misappropriated from members are finalised and has pursued the Trustees and service providers of several funds for their role in the surplus stripping. The process is complex and the court is required to appoint curators in some instances.

The DA has, for some time, asked written questions in parliament and in person to the Minister of Finance and the FSB on the process of appointing curators, the fees paid to curators and whether funds recovered are actually paid to members. In particular, we have been concerned about the appointment of Mr Tony Mostert as curator in numerous instances, and the fee arrangements that are in place. The sums paid to curators to date are substantial and there is some concern over how much money actually reaches the members from whom it was defrauded.

Given our existing concern over the relationship and financial arrangements in place between the FSB and Mr Mostert, the DA is seriously concerned about revelations made during the recent court proceeding relating to surplus stripping from the Cadac Pension Fund.

In Mr Tshidi's Founding Affidavit, in his capacity as the Executive Officer of the FSB, he stated that the Cadac Pension Fund had during 1996 received, from the Sable Pension Fund, assets in excess of R8 million to which it was not entitled. Mr Mostert, in his capacity as the curator of the Sable Pension Fund, had on numerous occasions made a claim against the Cadac Pension Fund for approximately R8 million.

While this case was still pending, Mr Mostert was appointed as curator of the Cadac Pension Fund. Mr Tshidi was asked under cross-examination on what basis, in the knowledge that there was a blatant conflict of interest with Mr Mostert acting as curator of both the Sable Pension Fund and the Cadac Pension Fund, did he support Mr Mostert's appointment as the curator of the Cadac Pension Fund.

At this point in time, Mr Tshidi advised that he wished to take legal advice from his Counsel and he and his Counsel were excused from the Court. When Mr Tshidi returned to the Court under cross-examination, he refused to answer the question on the basis that the answer thereto might incriminate him. There are very limited circumstances in which an answer in court can be refused. Mr Tshidi is saying that he may have committed a criminal act and that the answer to the question may in fact incriminate him and the FSB.

The FSB is the regulator of our non-banking financial services, which play a crucial role in our economy. Mr Tshidi is the Executive Officer of the FSB and the Registrar of Pension Funds and this situation thus warrants an extensive investigation. That investigation should include the question of why Mr Mostert features so prominently in the FSB's pursuit of similar cases, what Mr Mostert's remuneration was in each of these cases and what exactly the possible criminal act is that Mr Tshidi has referred to in court.

Statement issued by Dr. Dion George MP, Democratic Alliance Shadow Minister of Finance, February 1 2011

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