Lize de la Harpe, Senior Legal Advisor at Sanlam Corporate

Introduction

The FSCA on 6 August 2025 published Conduct Standard 2 of 2025 (RF) setting out the conditions prescribed in respect of Pension Benefit Administrators (the Conduct Standard). The Conduct Standard will replace Board Notice 24 of 2002 (BN 24) in two phases and applies in addition to any other requirements already imposed on benefit administrators through the Pension Funds Act, 1956 (PFA) and any other financial sector law.

Let’s unpack the impact.

Background

Section 13B(1) of the PFA provides that no person shall administer on behalf of a pension fund the receipt of contributions or the disposition of benefits provided for in the rules of the fund, unless such a person is approved by the FSCA and continuously complies with such conditions as may be prescribed. Those conditions for benefit administrators were, until recently, set out in BN 24.

The industry has undergone significant changes since the publication of BN 2024 (over 20 years ago), including the introduction of RDR, TCF and the enactment of the Financial Sector Regulation Act, 2017. For this reason, the FSCA identified the need to strengthen the regulatory framework governing benefit administrators to ensure that the framework supports the delivery of outcomes that are consistent with the outcomes set out in other financial sector laws supervised by the FSCA.

In July 2021, the FSCA accordingly published a draft Conduct Standard titled “Conditions Prescribed in respect of Pension Fund Benefit Administrators” for public comment. The draft Conduct Standard was initially placed on hold pending the implementation of the Conduct of Financial Institutions Bill.

As problems in the section 13B administrator environment persisted (exacerbated by the lack of an appropriate framework), the project was reprioritized. Following informal consultation with industry bodies who commented on the initial draft Conduct Standard, the final draft was submitted to Parliament in April of this year.

The conditions

Although the Conduct Standard repeats some of the conditions set out in BN 24, the requirements relating to these conditions have been expanded on and improved:

• Business and governance: The Conduct Standard places an obligation on benefit administrators to conduct their business in accordance with certain basic business principles, including achieving the relevant TCF outcomes. It also provides for detailed governance requirements and sets out the obligations of a benefit administrator and the responsibility to adopt, document, implement and monitor the effectiveness of governance arrangements.

• Changes in certain business information: The Conduct Standard requires notification to the FSCA where certain information changes, such as changes in the name or contact details of the benefit administrator and changes in key persons (as defined in the FSR Act).

• Fit and Proper Requirements: The Conduct Standard prescribes fit and proper requirements relating to key persons.

• Outsourcing: The Conduct Standard prescribes conditions relating to outsourcing by benefit administrators, including the management, oversight and review of outsourcing arrangements.

• Conflicts of interest: The Conduct Standard requires the benefit administrator to adopt, maintain and implement a conflict of interest management policy that demonstrates how the benefit administrator will comply with section 13B(5)(a) of the PFA. The benefit administrator must notify the FSCA of any incidents of material conflict of interest that might prejudice a fund or its members.

• Communication, Disclosures and Complaints management: The Conduct Standard prescribes conditions relating to communication with and disclosures to the fund. It also prescribes requirements relating to the management of complaints, including requirements relating to the establishment of a complaints management framework.

• Data management and maintenance of records: The Conduct Standard prescribes conditions relating to data management, including where the benefit administrator relies on third parties to retain data, and sets requirements relating to the maintenance of records, including a minimum period for retaining records.

• Financial matters: The Conduct Standard prescribes conditions relating to a variety of financial matters, including financial accounting, management of trust accounts, treatment of unclassified payments and indemnity insurance.

• Operational ability: The Conduct Standard prescribes conditions relating to operational ability which are aimed at ensuring that the benefit administrator has the operational ability to effectively perform its administrative functions. Where a benefit administrator intends to replace its administration system or to migrate from one system to another, the benefit administrator must, prior to the change, notify the FSCA of the proposed change. In addition, a benefit administrator must timeously inform all funds that are or may be affected by any material change in its administration system.

The FSCA will monitor compliance with the Conduct Standard by using pro-active supervisory approaches in which potential areas of concern are identified. Once risks have been identified, the FSCA will have engagements with the benefit administrator(s) concerned to try and remediate the situation.

The FSCA has undertaken to develop a reporting framework and data obtained through this framework will be used as an offsite supervisory tool identify conduct risks and trends specific to a particular benefit administrator and for benchmarking purposes across the sector.

Format of submissions

Section 108(2)(a) of the FSR Act provides that a conduct standard may provide for the FSCA to make a determination for purposes of the conduct standard, in accordance with procedures defined in the conduct standard. Accordingly, the Conduct Standard makes provision for the FSCA to determine the form and manner in which a specific notification, application and the like must be submitted to the FSCA.

FSCA RF Notice 10 of 2025 was accordingly published simultaneously with the Conduct Standard, determining the format of submissions to be made to the FSCA in terms of the Conduct Standard. These include the notification of termination of an administration agreement, register of assets held on behalf of a pension fund and the application for a proposed merger/ acquisition.

Conclusion

The initial draft proposed a 6-month period within which to comply. Following concerns from the industry as to whether this would be enough time, the FSCA conceded. As such, the final Conduct Standard sets out a staggered implementation – with some conditions coming into effect on date of publication whilst others allow for either a 6 or 12-month transition period, depending on the condition.

ENDS