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Fit and proper trustees to become valuable assets under FIMA

Fit and proper trustees to become valuable assets under FIMA

By Sybil Somaes, Managing Director of Compli-Serve Namibia

Time is marching on as we edge closer to the implementation of the Financial Institutions and Markets Act (“FIMA”) and if you currently serve as a trustee on a retirement fund, you may be wondering what comes next – if you will be able to carry on or if you will even want to remain a trustee.

In this article I unpack some of the requirements applicable to trustees on retirement funds as prescribed by FIMA, because forearmed is forewarned.

Who may serve as a trustee?

The Act, inter alia, requires the following: that the Principal Officer (PO) be appointed as an ex officio member of the Board. This is a new requirement and an interesting one, as most Principal Officers currently serve in this capacity as a result of being the HR manager of the participating employer, or they have some other day job. The PO now has to be a skilled and senior executive. The Act requires that the Board comprises a minimum of four members, of which active and retired members have the right to elect at least 50% of the board members.

Who may not serve as a trustee?

The Act prohibits the functionaries of the fund administrator from serving as trustees. Gone are the days where an administrator could dictate and directly influence how a fund is run and managed as directors, officers or employees of the administrator are no longer allowed to serve as trustees of the fund; functionaries or joint-venture partners or associates of the administrator may also not serve as trustees of a fund. The Act further prohibits consultants and other service providers to the fund from serving as trustees and financial intermediaries and institutions that render financial services to a fund are also prohibited from nominating or serving as trustees.

What are the new “Rules” of the game?

The Rules of the Fund must be amended within 90 days of the commencement date of the Act, currently, 01 January 2023 (a New Year’s gift from the Regulator) as part of compliance with the new requirements related to the Board. The Rules further need to set the constitution of the Board of Trustees; provide the procedure for the election, appointment and terms of office of trustees, and must outline the voting rights of trustees. It must further provide for a Board Code of Conduct, which must comply with the General Code of Conduct Standard. The Board is to meet four times a year and all meetings must take place in Namibia. It would be interesting to see how the new practice of online meetings will be perceived by the Regulator.

Who would be considered a fit and proper trustee?

The draft General Standard on fitness and propriety prescribes that NAMFISA must be satisfied on reasonable grounds that the appointment of the individual is not likely to have negative implications for the sound and prudent management of the Fund. The assessment takes into account factors such as the education and experience of the individual, the competence and capability of the individual and their honesty, integrity, fairness and ethical behaviour.

The requirements related to an individual’s fitness and propriety to serve as trustee are extensive and may be considered onerous by some, but the importance of the role of the trustee must not be underestimated, especially considering the lack of adequate retirement savings by people in Namibia.

We know that many trustees who currently serve are also members and have often ended up in these positions because no one else volunteered. It is important for employers and funds to consider these requirements when appointing trustees given the nature of the new responsibilities prescribed for trustees. It certainly is time that we reconsider how we remunerate qualified trustees too. Qualified and experienced trustees will be highly sought-after once FIMA commences. Start studying and updating your CVs to stand out. Until next time…

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