The largest fund manager, Botswana Insurance Fund Management (Bifm), is lobbying for whistle-blowers aimed at improving good corporate governance across the non banking financial institutions establishment.
The move follows government’s decision to establish a watchdog that would be named Non Banking Financial Institution Regulatory Authority borrowed from the Australian based-consultancy company.
Among some of the powers which the new body would have are: a team of investigators could pay surprise visits to the companies with the power to suspend and even to withdraw operating licenses for companies which breach of prudential rules.
Companies to be covered by the proposed law include insurance companies, insurance brokers, stock exchange(s), pension and provident funds and collective investments.
Jacques Marnewicke of Bifm/Sanlam warned that the impressive growth of the pension industry in Botswana is likely to attract international fraudsters hence government should come up with mechanisms to forestall their attempts. Bifm is the biggest fund manager in the country and controls P 11 billion.
Marnewicke said the system had to come up with a number of measures that would address issues such as day light corruption and conflict of interest to protect the pension plan holders.
The pension fund industry in the country is worth about P 25 billion since government moved from its rigid system to a more flexible and market orientated scheme. To date, the bulk of the money in the pension industry comes from public officers subscription which totals P 20 billion.
“We need a whistle-blowing system and the members should have the right and obligation to be protected from victimization,” Marnewicke said. “They need to stay anonymous and have the right to be heard. But they do not have the right to be vindictive.”
His comments were a serious challenge to the proposed law which only addresses issues of conflict of interest and financial crime through the use of whistle-blowers, like in the developed countries of the northern hemisphere.
He said for trustees to avoid conflict of interest they had to act independently and look after the interests of pension plan holders.
“We should also look at the legal standard and try to raise the bar every year. We should also try to look at the media standards before making any decision.
“The reason why I am saying this is that these corporate scandals did not start within the boardroom with people deciding on how they can defraud shareholders. It starts with the individual trying to push beyond the limit,” he said.
Tapologo Motshubi of Allan Gray praised the proposed law saying that it marked a new chapter and added that he hoped that government would allow the new authority to have its own whistle-blowing system.
“I think it is a good move given the amount of money managed by the non banking financial institutions,” Motshubi said on Friday.
Already, one of the leading auditing firms in the country, Deiloite & Touche, has opened a hotline for whistle-blowers to report all acts of impropriety.
“ Regulatory Authority’s principal objective is to regulate and supervise non banking institutions so as to foster their safety and soundness, the highest standards of business conduct, fairness, efficiency and orderliness of the non bank financial sector and the stability of the financial system,” the Government Gazette stated.
Among the key factor the authority will have to draw prudential rules to ensure that the currently less regulated sector does not cause mayhem in the financial market that can lead to the collapse of the economy.
The prudential rules will ensure that Botswana registered non bank financial institution work along the international accepted standards by ensuring that they are run by people with prudential skills, subscribe to good corporate governance, meet the set capital and liquidity requirements and use prescribed financial instruments and off balance sheet transactions among others.