Lize de la Harpe, Senior Legal Advisor at Sanlam Corporate

Introduction

The ruling by the Financial Services Tribunal (FST) in the matter of Bokamoso Retirement Fund v Financial Sector Conduct Authority (A26/2024) handed down on 19 May 2025 confirms that the FSCA cannot set a time limit on the exemptions granted in terms of section 7B of the Pension Funds Act, 1956 (PFA).

Let’s unpack the impact thereof.

Composition of the Board of Trustees

The composition of the Board, election procedure, terms of office, voting rights, powers of the Board and deadlock provisions must be set out in the rules of the fund.

Section 7A of the PFA states that notwithstanding the rules of the fund, every fund shall have a Board of trustees consisting of at least four members, 50% of which shall be member elected. The purpose of the provision is to give members of the fund an equal say in the affairs of the fund by creating minimum requirements relating to the representation of members.

Section 7B in turn makes provision for certain funds to apply for an exemption to the above requirement (that members have the right to elect 50% of the Board), which exemption may be subject to such conditions as imposed by the registrar. Funds typically exempted include retirement annuity funds, preservation funds and funds that have been established for the benefit of different employers (i.e.: umbrella funds).

Guidance Note No. 4 of 2018 (issued in October 2018) clarified the position of the FSCA in respect of applications for such exemptions and provided details of the conditions that may be imposed by the FSCA in such cases. Before this Guidance Note, exemptions were granted for a limited period not exceeding three years. After receiving representations from funds, the FSCA concluded that exemptions granted do not need to be subject to a specific period. As such, exemptions granted by the FSCA on application by a fund, depending on the specific circumstances, may be indefinite. The Guidance Note however stresses that the granting of an indefinite period exemption is not automatic. Funds that have existing exemptions must apply for an exemption with indefinite duration before the expiry date of the existing exemption. Funds must apply in writing and the FSCA will consider the application for exemption on a case-by-case basis taking into account the requirements in section 7B(1)(b) of the PFA and section 281 of the Financial Sector Regulation Act, 2017.

Section 26(2) of the PFA states where a fund does not have a properly constituted Board in terms of section 7A (or does not have an exemption in terms of section 7B) and failed to constitute a Board after 90 days’ written notice by the FSCA, or where the fund cannot constitute a Board properly, the FSCA may:

• Appoint so many persons as appropriate or necessary to make up the full complement or quorum; and
• Assign to such Board such specific duties as the FSCA deems fit.

A Board so constituted shall hold office until the FSCA is satisfied that the fund has constituted a valid Board in terms of section 7A and the FSCA has relieved the former Board in writing of its duties.

Bokamoso Retirement Fund v Financial Sector Conduct Authority (A26/2024) FST – 19 May 2025

The applicant was an umbrella fund established for the benefit of different employers. The Fund obtained an exemption in terms of section 7B(1)(b)(i) of the PFA on 7 August 2017 for a period of three years. During the Covid lockdown when it was not possible to hold board elections, the Fund applied for a further exemption in January 2022, which the FSCA denied on the basis that the Board was not properly constituted as the Fund’s exemption had at that point already expired. The FSCA was of the view that the election of the then current Board during November 2021 was irregular. The Fund further applied for the registration of special rules for certain individual employers which the FSCA also refused for the same reason.

Approaching the FST, the Fund relied on the High Court judgment in Financial Sector Conduct Authority v Municipal Worker’s Retirement Fund (A50/21) [2022] ZAGPPHC 977 where it was held that there is no express provision in section 7B of the PFA that an exemption is to be for a limited duration. The Full Court found that there was no reason to read in such implied provision and therefore the FSCA had no right to impose a time limit and should not do so when granting exemptions (including when doing so pursuant applications by funds whose exemptions had lapsed or are due to lapse because of the time limits).

Considering the above, the FST held that the FSCA is bound by this High Court decision which it did not appeal – and so is the FTS itself. This interpretation of the PFA by the Full Court is a decision in rem (Latin phrase for “against a thing”) since it does not depend on the facts or identity of any particular fund; and that interpretation binds all. As such, the time limit in the last exemption granted to the Fund is to be deemed pro non scripto.

The FST also rejected the FSCA’s submission that the effect of the aforementioned judgment is that only going forward from the date of the judgment (as one would find in constitutional challenges of legislation) the FSCA should not impose time limits when granting exemptions in terms of section 7B.

Although the term of office of the previous Board expired during the Covid epidemic in 2020, it was not possible to hold an election before November 2021. The FST held that if the FSCA was of the view that the Fund had no board, it was supposed to act in terms of section 26(2) of the PFA to ensure that a board is properly constituted. Instead, it allowed the Board to function and did not even suggest that the Board had no locus standi in the present matter.

The FST accordingly concluded that the FSCA erred in not considering the Fund’s application and set aside all the decisions or non-decisions by the FSCA based on the ground that the exemption granted lapsed after three years and remitted the matter back to the FSCA for reconsideration.

Conclusion

The crux of the FST’s ruling can be summarised as follows – section 7B(1)(b) of the PFA does not provide for an exemption that may be subject to a time limitation, as nowhere in the provisions of section 7B does it indicate that the exemption must be granted subject to a time period. However, the section does provide that the exemption may be subject to such conditions as may be determined by the registrar. Properly interpreted, however, this section does not enable the FSCA to impose a time limitation by way of a condition on the granting of the exemption.

ENDS