Ruling concerns

By Staff Writer

Desné Masie

Loss of skilled staff from PFA office

Concern about use of powers

Unhappiness is simmering in the pension fund industry over the way the new pension funds adjudicator (PFA), Mamodupi Mohlala, is approaching her duties. She succeeded Vuyani Ngalwana in June 2007.

One area of concern is the way Mohlala interprets her powers. At the recent Pension Lawyers Association (PLA) conference in Somerset West, attended by senior experts and trustees, Mohlala said her findings on the law should be treated as legal precedent until a court sets them aside. She tells the FM that “the basis for my argument is section 30O (1) of the Pension Funds Act, which states that the determination of the adjudicator shall be deemed to be a civil judgment of any court of law had the matter in question been heard by such court”.

Can the adjudicator’s rulings be regarded as precedent? No, says Rosemary Hunter, director of employee benefits practice Hunter Law: “Section 30O makes it clear the PFA’s judgments are deemed to be civil judgments for the purpose of their enforcement only.”

Though PFA determinations may provide an indication of the adjudicator’s likely approach to similar matters in the future, “they are not legal precedent and the adjudicator is required to consider the legal issues afresh each time she decides a matter,” says Hunter.

This view is echoed by David Geral, employee benefits director at Bowman Gilfillan: “Precedent means a judge (or adjudicator) in a particular tribunal is bound to follow the earlier decisions of that tribunal, unless he or she can be convinced that the earlier decision in the same tribunal was manifestly incorrect in law. The adjudicator does not have the authority to depart from the rulings of superior tribunals.”

For her part, Mohlala has been vocal about trustees of pension funds “wasting the resources of the adjudicator’s office by not applying their minds”. It is true that trustees can be negligent, and too many complaints that get to the PFA could have been lodged and resolved first with members’ funds or employers.

Bowman Gilfillan points out that the PFA “has the power of making someone who is wasting her office’s time (and the other party’s) contribute to the other party’s costs”. And, adds Hunter Law, “if the complaints are clearly lacking in any merit, or have prescribed, or fall outside her jurisdiction, they should be dismissed immediately”.

The substance of industry criticism is that the PFA’s time needs to be better allocated.

At the PLA conference Mohlala also surprised experts by introducing her concept of a sector “scorecard”, which would be used to name and shame funds and service providers against whom a large number of complaints have been determined.

Though the media has welcomed the move, industry lawyers say the legislation does not grant her the power to do this. They also complain that details about consequences for noncompliance are too vague. Says one lawyer: “This scorecard is all her own invention. The industry does not need to comply with it.”

Hunter observes that sheer economies of scale mean some funds have high numbers of complaints because they are large funds. She adds: “We have no difficulty with publicity being given to repeated misconduct by funds or service providers, but this really should be the role of the press.” Hunter also believes the “adjudicator should remain dispassionate about these matters and decide each case on its merits”.

Jonathan Mort, director of retirement fund specialised services at Edward Nathan Sonnenbergs, says: “The only relevant statistic is this: the number of complaints that succeed as a fraction of membership.” Mohlala responds: “Even if there is no legal sanction, there is financial sanction in that it will have an influence on investor decisions.”

She says that if fund members believe their fund is not well managed or does not take the workings of the office of the PFA seriously, “they will have the right to take their business elsewhere to a fund that is more receptive to their needs”.

The problem here is that for most members of occupational funds, participation is not voluntary. Says Mort: “Our tax laws do not permit the voluntary transfer of members from fund to fund, unless the rules of the fund allow for that, and usually that is from an existing group of options offered by the employer.”

Another allegation is that there’s an exodus of staff from the PFA office because of Mohlala’s management style. Departures include Naleen Jeram, the deputy adjudicator under Ngalwana, and senior assistant adjudicators Zareena Camrodien and Lisa Shrosbee. However, Mohlala says her style is informative and consultative, and that these departures were part of routine turnover.

But Mort says: “I am concerned about the loss of skills and the time it takes for matters to be resolved. And now I understand the Cape Town office, where most of the skills sit, is going to be closed — and it is unlikely that those staff will relocate to Johannesburg.”

When Mohlala was at the Independent Communications Authority of SA (Icasa), there were criticisms because she continued to practise as a lawyer with her company, Mohlala Attorneys Inc. She says: “The issue of moonlighting was resolved while I was still at Icasa. It was found that there was no contravention in terms of the Icasa Act. That is why subsequent thereto I was reappointed to the national assembly as a councillor to serve a second term at Icasa. During the second term I then resigned and was appointed as the PFA.”

Mohlala Attorneys Inc is still a separate legal entity. Does she still practise as a lawyer? “I am an admitted attorney of the high court of SA and my name still appears on the register of attorneys.”

Is Mohlala concerned about the industry’s perception of the office? “I am here to do what is required of me in terms of the mandate of the Pension Funds Act and I am executing [my duties] as [stated] therein.”

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