High court blocks FSCA bid to oversee MEPF elections, warns regulator against overreach

Tawanda Karombo

The Financial Sector Conduct Authority (FSCA) has been criticised for overstepping its mandate after the South Gauteng High Court in Johannesburg dismissed its application to supervise the Municipal Employees Pension Fund (MEPF) general meeting and election of trustees.

The MEPF was due to hold its general meeting on Thursday, 11 December. The FSCA sought to supervise the meeting and the elections and had requested for unredacted information about attendees among other information.

The FSCA had also raised allegations that the MEPF was being irregularly run, raising governance and administrative irregularities. It was against this backdrop that the FSCA applied to be allowed to intervene and supervise the elective general meeting of the MEPF.

However, the MEPF, its principal officer and Akani Retirement Fund Administrators, were cited as first, second and third respondents, respectively, in the litigation initiated by the FSCA, opposed this, saying the regulator was overstepping its mandate. The MEPF argued in court that the FSCA was acting outside the scope of its statutory powers. 

It argued that the decisions that the FSCA was seeking - including supervisory inspection and attendance at the general meeting and the availing of unredacted municipal returns - were irrational, disproportionate and procedurally unfair.

The MEPF also averred that the redactive information it provided to the FSCA as per its request was necessary so as to maintain electoral integrity at the general meeting, uphold the representatives' statutory rights. It had also done this to ensure that any disclosures remained within the strict bounds of the FSCA's statutory authority.

On Wednesday, Judge Mahona AJ ruled that the FSCA must act within the confines of its statutory powers and in accordance with the requirements of administrative justice.

“The FSCA did not demonstrate that unredacted municipal returns were reasonably necessary for the performance of its supervisory functions, nor did it show that the concerns it identified could not be addressed through less intrusive means,” reads a part of the ruling by Mahona AJ.

“The section 131 decision therefore lacked the jurisdictional foundation required by the statute and was neither rational nor procedurally fair.” 

MEPF and Akani Retirement Fund Administrators said the ruling ensures that the FSCA as regulator acts responsibly and within the law and also holds it to account, 

As per the court ruling, the FSCA is legally entitled to ensuring trustees of MEPF are properly elected and that the board is lawfully constituted as stipulated by law.

However, the ruling also concluded that the FSCA has to meet jurisdictional requirements that the specific information sought is reasonably necessary for the statutory purpose identified. Under the present circumstances, the court ruled that this had not been the case.

The ruling paved the way for the general meeting of MEPF to proceed without the glare of the FSCA.

The High Court also ruled that the general meeting was imminent in line with the MEPF’s governing rules that stipulate that representatives of members must meet to elect the Board of Trustees every three years. 

Moreover, the FSCA “did not demonstrate that unredacted returns were reasonably necessary for supervisory purposes, nor did it articulate a factual basis capable of sustaining the extraordinary step of conducting an on-site inspection” of the general meeting.  

The court summarily ruled that although the FSCA has broad powers to regulate and supervise pension funds in South Africa, these powers be exercised lawfully, rationally, and proportionately. 

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