Financial Sector Regulation Bill: deliberations and adoption

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Finance Standing Committee

30 November 2016
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The National Treasury presented the draft revised version of the Financial Sector Regulation (Twin Peaks) Bill to the Committee. Amendments were made to clauses 39, 49, 61, 65, 72, 86, 110, 112, 117, 266, 273, and 274. The Committee went ahead and voted on the draft version of the bill, but the DA reserved its opinion on the vote. The Committee report was discussed and adopted with amendments.

The Committee received a letter from the President on the referral of the Financial Intelligence Centre Amendment Bill (B 33B-2015). The letter indicated that certain provisions of the bill did not pass constitutionality. Members were concerned that the provisions referred to in the letter with regard to conducting searches for the purpose of investigations were similar to provisions in the Twin Peaks Bill. If this matter was found to be unconstitutional, Members believed that it would impact on this and other legislation as well. The Committee discussed this issue and went ahead with the vote, awaiting legal counsel opinion on the Financial Intelligence Centre Amendment Bill from National Treasury and Parliament’s legal advisors. 

Meeting report

Financial Sector Regulation Bill

Ms Jeannine Bednar-Giyose, Director: Fiscal and Intergovernmental Legislation, National Treasury, read out the draft revised Financial Sector Regulation Bill for the Committee’s deliberation.

Clause 39: Removal of Chief Executive Officer

(5) If the Chief Executive Officer is removed from office in terms of subsection (2), the Minister must, within 30 days, submit the report and findings of the independent inquiry to the National Minister.

Clause 49: Disclosure of interests

(3)(b) Any consideration of, or decision on, a matter which does not comply with paragraph (a) is void and must be reconsidered or decided without the member present.

(8) When a person has failed to disclose a material interest in terms of this section, the Prudential Committee must publish a notice on the Prudential Authority’s website that a failure to disclose a material interest occurred, which notice must include the details of the failure.

Clause 61: Commissioner and Deputy Commissioners

(1) The Minister must appoint a person who is fit and proper and has appropriate expertise in the financial sector as the Commissioner of the Financial Sector Conduct Authority.

Clause 65: Removal from office

(8) If the Commissioner or a Deputy Commissioner is removed from office in terms of this section, the Minister must, within 30 days, submit the report and findings of the independent inquiry to the National Assembly.

Clause 72: Disclosure of interests

(3)(b) Any consideration of, or decision on, a matter which does not comply with paragraph (a) is void and must be reconsidered or decided without the member present.

Clause 86: Independent evaluation of effectiveness of co-operation and collaboration

86. (1)(a) The Inter-Ministerial Council must, as soon as practicable, following the expiration of the six month period described in Section 77(1), commission an independent evaluation of the establishment of co-operative and collaborative mechanisms between the financial sector regulators, the Reserve Bank, the Financial Intelligence Centre, the Council for Medical Schemes and the Competition Commission.

(b) The Inter-Ministerial Council must, every two years after the initial independent evaluation referred to in paragraph (a), commission an independent evaluation of the effectiveness of the co-operative and collaborative mechanisms between the financial sector regulators, the Reserve Bank, the Financial Intelligence Centre, the Council for Medical Schemes and the Competition Commission.

(2) An evaluation in terms of this section must at least contain analysis of the memoranda of understanding required in terms of Section 77, and the outcome of any and all consultations in terms of Section 78.

(1)(3) The Inter-Ministerial Council may on its own initiative, or at the request of a financial sector regulator, undertake at any time commission an independent evaluation of the effectiveness of co-operation and collaboration between the financial sector regulators, the Reserve Bank, the Financial Intelligence Centre, the Council for Medical Schemes and the Competition Commission.

(5) Any evaluation commissioned by the Inter-Ministerial Council in terms of this section must be tabled in Parliament immediately following the Council’s consideration of the evaluation, and must be accompanied by a report from the Council on the evaluation’s contents.

Clause 110: General

(3) A standard must be published on the maker’s website.

Clause 112: Interpretation

(b) The Chief Ombud chairs meetings of the ombuds, or, in the absence of the Chief Ombud, a person appointed by the Chief Ombud;

(c) If three ombuds in writing request the Chief Ombud to convene a meeting of the Ombud Council, a meeting of the ombuds must be convened.

Clause 117: Reporting obligations of licensee

(3) This section is subject to a person’s protections against self-incrimination in terms of any law.

Clause 266: Licensing

(2) A licensee who contravenes section 117 [commits an offence and] is liable [on conviction of a fine] to an administrative penalty not exceeding R5 000 for each day during which the [offence] contravention continues.

(3) A licensee who contravenes section 127 [commits an offence and] is liable [on conviction to a fine] to an administrative penalty not exceeding R50 000.

Clause 273: False or misleading information

(1) A person who provides to a financial sector regulator or the Reserve Bank, in connection with the operation of a financial sector law, information that is the person knew or believed, or ought reasonably to have known or believed, to be false or misleading, including by omission, commits an offence and is liable on conviction to a fine not exceeding R5 000 000 or imprisonment for a period not exceeding 5 years, or to both a fine and such imprisonment.

(2) If the person knew or believed, or ought reasonably to have known or believed, that the information was false or misleading, the maximum penalty for the offence is a fine not exceeding R10 000 000,R10 000 000 or imprisonment for a period not exceeding 10 years, or to both a fine and such imprisonment.

Clause 274: Accounts and records

(1) A person who is required in terms of a financial sector law to keep accounts or records commits an offence if –

(a) the accounts or records do not correctly record and explain the matters, transactions, acts or operations to which they relate, and is liable on conviction to a fine not exceeding 5 years, or to both a fine and imprisonment; and

(2) The maximum penalty for an offence in terms of subsection (1) is a fine not exceeding R10 000 000, or imprisonment for a period not exceeding 10 years, or to both a fine and such imprisonment, if

(a) the person(b) the person –

The Chairperson went through the Bill clause by clause.

Ms P Kekena (ANC) moved for a vote on the Bill.

Mr S Buthelezi (ANC) seconded the move.

The Bill was passed with amendments. The DA reserved its opinion on the vote.

Discussion

Mr D Maynier (DA) said that Mr Ismail Momoniat, Deputy-Director General: Tax and Financial Sector Policy, National Treasury, articulated his concern. The first phase was to see if a memorandum of understanding (MoU) existed, whether it was signed, and its contents.

Mr Momoniat replied that the wording of the clause could be tweaked so that it covered all those concerns.

Ms T Tobias (ANC) asked whether the words “co-operative” and “collaborative” in clause 86 had been in the bill before.

Mr Momoniat replied that they had been.

The Chairperson asked whether National Treasury had not been able to meet before the meeting.

Mr Momoniat replied that they had met as a team.

The Chairperson said the Committee had spent more than 159 hours on the bill, and he felt that National Treasury was not delivering. A lot of work had been done thus far and he felt disappointed that National Treasury had not been able to deliver timeously.

Financial Intelligence Centre Amendment Bill

Mr Maynier said that the President’s lawyers had referred the Financial Intelligence Centre Amendment Bill back to the Committee on the issue of warrantless searches. There was a similar clause in the Twin Peaks Bill, and he felt that the Committee needed to revisit the relevant clause. If there was any doubt with regard to the warrants and searches in the Twin Peaks Bill, it would be best to fix the defect now.

Mr Momoniat replied that National Treasury had also received the note from the President. He had asked senior counsel to look at it to understand the issues the President had. This clause was similar to a lot of other legislation so therefore, if it was found to be unconstitutional, it would have implications for other legislation as well. It would be best to bring the bill back when it was in the National Council of Provinces (NCOP) to have a look at it. He had asked for an urgent opinion from senior counsel on what its views were, and further work was required, which would be ready by the following week. The document from the President would also be sent to the South African Revenue Service (SARS) and other institutions to get their opinion.

Mr A Lees (DA) suggested that as National Treasury’s lawyers looked at the Financial Intelligence Centre Amendment Bill, they could also look at the Twin Peaks Bill in a parallel manner. It was important to note in the Committee report that the Committee had brought up this issue.

Advocate Frank Jenkins, Senior Legal Advisor, Parliamentary Law Office, said in terms of process the Committee should not send something to the NCOP that was not constitutional. There should be a control mechanism in place.

The Chairperson said the Committee should not be discussing the content, but rather what the process should be. When the President’s lawyers say something is unconstitutional, it should not be sacrosanct. The Committee should not follow that this was unconstitutional. The Committee was allowed to say that it did not agree with the President’s lawyers. He wanted to engage with the President’s lawyers.

Mr Buthelezi asked if it was possible to take this matter to court without going back to the President.

Ms Tobias suggested that the Committee sit with legal advisors and engage to try and find each other, to avoid legal costs by going through the courts.

The Chairperson noted that the Committee would be sitting on the Financial Intelligence Centre Amendment Bill the following week, and could discuss the President’s letter then.

Mr Maynier felt that the Committee had to deal with the matter as soon as possible, and that it should be a priority.

The Chairperson said that the Committee would look at the clause carefully and seriously, and give it to the NCOP, but currently the Committee had reached its threshold on the Twin Peaks Bill.

Mr Maynier emphasised that he would feel comfortable to proceed with the Twin Peaks Bill under any other circumstance, but felt that the Committee had to confront the current issue at hand. The Chairperson could not outsource this issue to the NCOP. It would be best to fix the defect, and then send the Bill to the NCOP.

The Chairperson disagreed that the Committee was outsourcing the Twin Peaks Bill. He felt that Mr Maynier and Mr Lees had issues with the Twin Peaks Bill, and were defending the DA. They were piggy-backing on this letter from the President, and he did not agree with them.

Mr Maynier said that the Chairperson was misrepresenting the DA’s intention. The only reason why he did not feel comfortable going ahead with the Bill was because it may contain clauses which were unconstitutional, and for no other reason.

Adv Jenkins said that he had gone through the President’s letter and on page 6 under e(ii), it read: “The proposed section 45B(1C) does not require that the Centre or supervisory body must specify that the  inspector may only search for or require the production of information related to the business to which the provisions of the Act apply, let alone particular business. Although the section may be read down in this way, the absence of an appropriate qualification leaves the discretion of the inspector conducting the search unbound to that extent; and may potentially reach innocent activity in private homes.”

The Chairperson asked that the Committee look at the original version of the bill.

Mr Buthelezi wanted to know how long it generally took to obtain a search warrant. He also wanted to know if a warrantless search was different to a routine police stop and search procedure.

Adv Jenkins replied that it was possible to get a search warrant from a judge within a few hours if needed.

Ms Tholoana Makhu, Senior Legal Advisor, Financial Services Board, said that the searches referred to in the bills were always limited to financial sector regulation matters or contraventions.

Mr Lees felt that in principle that was accepted, but it was not always the case.

The Chairperson said that it should be noted in the Committee report that the Committee felt the clause was reasonably constitutionally sound.

Adoption of Committee report

The Chairperson read through the report of the Committee.

Ms Tobias moved the adoption of the report.

Mr Buthelezi seconded the move.

The Committee adopted the report with amendments.

The meeting was adjourned.

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