Thursday, October 1, 2020

Non bank regulator moves to review financial services legislations

Bob Hobart, the newly appointed Chief Executive Officer of the Non Bank Financial Institutions Regulatory Authority (NBFIRA), has identified five legislations in the financial services sector that need to be reviewed as the body begins its work.

Hobart told an annual Botswana Pension Society retirement conference on Wednesday that NBFIRA Act, which created the body, will be an ‘umbrella act’. It will work alongside the Insurance Industry Act, The International Insurance Act, The Pension and Provident Funds Act, Botswana Stock Exchange Act, The Collective Investment Undertakings Act and Part XVI of the Income Act.

Hobart later told The Sunday Standard that some of these laws are ‘outdated’ and added that for pension fund sector, the body will be seeking suggestions for legislative change from the pension fund industry, amongst others.

“Unfortunately, the other statutes, including the Pension and Provident Funds Act, are somewhat out of date and need revision,” said Hobart.
“For example, the Pension and Provident Funds Act does not even contemplate the registration of a number of important participants in the pension industry.”

He revealed that already NBFIRA has started a legislative review process with the insurance industry. Hobart said that with his experience he has done reviews in other countries and expect support from the industry and government.
“This is not new, I have done this in Tanzania,” he said. “We have started with the insurance industry and we have sent 150 letters to the industry including insurance companies, brokers and agents,” he added.

The NBFIRA, which is partly modeled in the same fashion as South Africa’s Financial Services Board (FSB), will regulate asset managers and notorious micro lenders which are not regulated by the Banking Act. It will also keep an eye on pension and provident fund administrators, custodians, investment advisors and security dealers.

Hobart told Sunday Standard that although he is not sure when he will begin the legislative review process in the pension industry, what he knows is that he has identified a South African expert to help with the review.

He said in the meantime they will be conducting research and benchmark with Namibia and South Africa and after that the organisation will issue a discussion paper to the stakeholders.

“Then we think we can come up with an effective framework for the pension fund industry,” said Hobart. “I know where to get talent and the support is there from government. That is why they passed the NBFIRA Act; it showed their seriousness.”
Hobart is taking over after years of lack of a regulatory body in the unregulated financial services sector with many clients suffering at the hands of the fund managers while there is a case backlog.

However, he said the nation needs patience because they will deal with these cases in a ‘systematic fashion’ adding, “I will rather be right than quick.”

The authority will see insurance companies, fund management outfits, stock exchange and collective investment undertakings being put under scrutiny to avoid cases of conflict of interest and other financial crimes. It will also enhance the status of Botswana registered companiesÔÇöespecially those registered under the International Financial Service Center.

“ ..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 Act establishing the authority 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 internationally 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.

The authority will be given a wide range of powers, such as to carry surprise checks on the conduct of the non bank financial institutions. They will be beefed up by a team of investigators to ensure that they are not involved in financial crimes.
It also recommends some punitive actions which can go tenfold than the damage caused by the company accused of breaching the convent rules. And it also proposes automatic cancellation of the operating licence if the company is found to be in breach.

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