South Africa Law Update
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Financial Sector Regulation Act 2017 Signed Into Law By President Jacob Zuma

On 21 August, 2017, President Jacob Zuma has signed into law the Financial Sector Regulation Act, 2017. This Act is also known as "Twin Peaks", as it establishes two new financial sector regulators, the Financial Sector Conduct Authority and the Prudential Authority with jurisdiction over all financial institutions, and to provide them with a range of supervisory tools to fulfil their objectives. The implementation of the Twin Peaks model in South Africa has two fundamental objectives of strengthening South Africa’s approach to consumer protection and market conduct in financial services; and creating a more resilient and stable financial system. According to the President “Twin Peaks” model will see the creation of a prudential regulator, which will administer risks taken on by financial firms such as banks and focus on macroprudential aspects of financial stability. It will be housed in the South African Reserve Bank (SARB). This Act aims to achieve a financial system in order to take care of financial customers interests, and supports balanced and sustainable economic growth in the Republic, by establishing, in conjunction with other financial sector laws, a regulatory and supervisory framework. According to the Presidency, the framework also promotes the efficiency and integrity of the financial system; the prevention of financial crime; financial inclusion, as well as the transformation of the financial sector. This Act shall also contain provisions for ensuring co-operation and collaboration between the financial sector regulators, the National Credit Regulator, the Financial Intelligence Centre and the South African Reserve Bank.

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South Africa's Retirement Funds Default Regulations To Be Effective From September 2017

The first draft of the retirement funds default regulations was published for public comment on 22 July 2015, and revised after taking into account public comments. The second draft of the regulations was published for public comment on 9 December 2016. National Treasury of South Africa on 25 August, 2017 gazetted final retirement fund default regulations that will guarantee members of retirement funds obtain good value for their savings and be able to retire comfortably. These final retirement funds default regulations which will take effect on 1 September 2017. These default regulations are the product of an extensive consultative process between National Treasury, industry, the Financial Services Board (FSB) and other interested stakeholders. As per these regulations the retirement funds’ trustee boards shall offer a default in-fund preservation arrangement to members of the trustee board who leave the services of the participating employer before retirement, and also a default investment portfolio to contributing members who do not exercise any choice regarding how their savings should be invested. The regulations provides for setting up of a fund for retiring members with annuity options, either in-fund or out-of-fund, and can only “default” retiring members into a particular annuity product after a member has made a choice. Member defaults should be relatively simple, cost-effective and transparent. The default regulations will require that fund trustee boards assist members during the accumulation and retirement phases. Under these regulations the employee will have the right and choice to withdraw, upon request, the accumulated savings or to transfer them to any other fund, thereby achieving portability. According to the regulation the “default” annuity should also be appropriate for members, well communicated and offer good value for money. It also requires members to be given access to retirement benefits counselling to assist them in understanding and giving effect to the annuity strategy. Pension fund, pension preservation fund and retirement annuity funds are required to establish an annuity strategy. The Retirement Fund Default Regulations provide that members of provident funds are not compelled by to purchase an annuity upon retirement. Treasury said that the annuitisation of provident funds remains under discussion at National Economic Development and Labour Council (NEDLAC). As per the Treasury these final regulations will be continuously monitored, assessed and reviewed to enable essential updates that ensure that members of retirement funds have protection against excessive fees, certain bad practices etc. According to Treasury existing default arrangements will be expected to be fully aligned to the by 1 March 2019.

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30 August 2017
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