Madam Deputy Speaker and hon members, financial institutions play a critical role in the smooth functioning of any modern economy and assist with redirecting peoples' services into capital investment necessary for economic growth. The failure of any financial system due to the lack of consumer confidence, among others, will be the undoing of any economy. Policy-makers all over the world do everything to instil confidence in their financial system. Trust, integrity and proper regulation are the glue that holds the system together. We need to ensure that the system is stable and instils confidence in all stakeholders.
Therefore, it is crucial that we review all current financial legislation to assess its relevance to current challenges. The recent abuses in the financial services industry highlight the need to review the powers given to our financial regulators and close any regulatory loopholes. Consumers deserve to be protected. An individual cannot be expected to assess the risk of any financial institution and take the necessary protective measures; that is the role of the financial regulators. We need to support this Bill, which has, as its main objective, consumer protection.
The Financial Services Laws General Amendment Bill amends several pieces of financial sector legislation under the administration of the Financial Services Board and the SA Reserve Bank. The Fidentia matter clearly indicates that the protective measures applied to moneys paid into trust for the benefit of minors are inadequate.
Under the current law, moneys paid into trust under section 37(c), intended mainly for minors, are not subject to the Pension Funds Act once they are transferred out of a specific pension fund. These types of trusts are generally supervised by the Master of the High Court. The Association of Trust Companies of South Africa confirmed during the hearing that the regulatory capacity and framework in the office of the Master of the High Court are inadequate. The Fidentia matter has exposed the inadequacies in our regulatory framework.
This Bill provides for the establishment of beneficiary funds into which minors' moneys can be paid. The Financial Services Board will be required by this Bill to exercise oversight over these beneficiary funds. We need to protect orphans and widows. The Bill stipulates that all beneficiary funds established on or after the commencement date of the Pension Funds Amendment Act of 2008 must register with the FSB in terms of this Act. The registrar may exempt any fund where practical difficulties hinder the strict application of a specific provision of this Act.
There are certain stakeholders in the financial services sector who are unhappy with the powers conferred on the FSB in this Bill. The concern is around the power of the FSB to conduct on-site inspections. We have clarified this matter during the debate on the Financial Intelligence Centre Bill. One is once more compelled to restate the explanation given in that debate. The power to conduct on-site inspections by a regulator is a well-established international practice.
Inspection methodologies differ from country to country. In the United States of America, for example, large teams of inspectors spend a lot of time at the premises of a financial institution, conducting a thorough review of most areas of regulatory compliance. The British model of inspection is more risk-based, where small teams spend a short period at the premises of the financial institution conducting a review of specific issues identified by off-site analysis. We cannot water down this important regulatory principle.
The current Pension Funds Act has serious limitations. Under current law, the Registrar of Pension Funds cannot remove any pension officer if he or she is no longer fit and proper. The registrar is empowered by this Bill to act speedily to remove such an officer with the aim of protecting the interests of beneficiaries. Trust and integrity hold this system together. The registrar needs these powers to help in restoring consumer confidence once a principal officer, valuator or auditor has lost the fit and proper status.
This Bill also makes provision for whistle-blowing. The principal officer and/or the auditor must, on becoming aware of any matter relating to the affairs of a pension fund which, in the opinion of the auditor or the principal officer, may prejudice the fund or its members, inform the registrar thereof in writing.
The principal officer or the auditor must, within 21 days of his or her appointment being terminated by the Fund, submit a written report to the registrar detailing the principal officer's perceived reasons for the termination. Trustees have to be held accountable for their actions.
The current National Payment System Act does not make provision for certain nonbanking institutions taking part in the clearing and payment system. This poses major risks as the SA Reserve Bank does not have the oversight responsibility over third-party providers and system operators.
The Bill addresses these shortcomings by making provision for new participants in the national payment system and bringing them under the supervision of the SARB. The Banking Association was concerned that the entry and participation of nonbanks in the national payment system poses some risks. This Bill clearly stipulates that the new participants will have to meet the criteria set by the SARB.
The national payment system is the bedrock of the stability of any modern financial system. Failures can disrupt the financial system and bring the whole economy to a halt. Last year this House passed the Pension Funds Amendment Act which brought about the clean-break principle on divorce. There are those who wanted to interpret the matter incorrectly. We are restating the clean-break principle in this Bill. Divorce orders granted prior to 13 September 2007 must be paid or transferred in accordance with the wishes of the nonmember spouse, as it would normally apply with divorce orders granted after 13 September 2007.
In conclusion, let me remind the House that sound macroeconomic policy is the bedrock of comprehensive prudential and market conduct regulation. Price stability is essential to the overall efficiency and stability of any financial system. Inflation expectations have to be anchored. This is essential for the smooth functioning of the financial services industry. The ANC supports this Bill.