Tuesday 11 May 2021
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The positives and negatives of the FIM Bill

The Namibia Financial Institutions Supervisory Authority (NAMFISA) through their line ministry, the Ministry of Finance, is getting ready to present the Financial Institutions and Markets (FIM) Bill to parliament for promulgation later this year.
The question that many in the effected non-banking financial services sector have been asking themselves, whilst reading through the provisions of the bill, is if the promulgation of the bill will be a positive or negative development for the sector.
The bill aims to modernise Namibia’s non-banking financial sector, bringing it in-line with international standards, replacing the Pension Funds Act 24 of 1956 amongst others.  As at the end of the second quarter of 2018 the non-banking financial sector had assets under management of N$288.9 billion with pension fund investments of N$141.4 billion constituting the majority of these assets.
The figure for the non-banking financial sector exceeds Namibia’s GDP, which stood at N$ 198.5 billion at the end of 2018 according to Namibia Statistics Agency estimates.
This illustrates the importance of the non-banking financial sector to Namibia’s economy as funds from this sector, play an important role in stimulating economic growth in the domestic economy. It thus goes without saying that appropriate regulation of the institutions intrusted with administering these funds, which often belong to the public, is critical to Namibia’s long term economic prosperity.
The purpose of the FIM Bill is to consolidate and harmonise the laws regulating financial institutions, financial intermediaries and financial markets in Namibia and to provide for incidental matters.
The FIM Bill will consolidate seven Acts which currently regulate non-banking financial service providers, thus providing a single reference point for all regulation pertaining to investment institutions in Namibia.
Additionally the FIM bill will introduce a Financial Services Adjudicator, which will settle disputes between consumers and service providers.
As an example, the South African financial services adjudication system has created a cost-effective and practical method to resolve complaints without having to go to court and redresses the imbalance of resources and expertise that likely exist between a consumer and a financial institution. However, the FIM Bill is lengthy, as it has over 600 pages, is complex and is making it difficult to comprehend and implement.
There has been some industry consultation done before the Bill is presented to parliament. For the pension funds industry consultations were done through the industry body, the Retirement Funds Institute of Namibia (RFIN).
Some issues highlighted by industry participants include overregulation by NAMFISA, with stricter conditions set for service providers to operate under, this will potentially lead to fines, closure of service providers or imprisonment of their agents for non-compliance.
Another observation is that more stringent reporting requirements will negatively affect smaller funds, especially those operating the insurance and pension industries, as they may not be able to afford to carry out the new compliance procedures required by the FIM Bill, this will force them to close down or consolidate into larger funds.
The twelve month timeframe for implementation of the provisions of the bill, is also of great concern, meaning that there is a possibility that certain Funds may not be compliant within the time period, leading to deregistration of funds.
The changing of trustees, especially those who do not currently have the necessary qualifications to pass the fit and proper test as set by NAMFISA, but are the preferred representatives of employees on the boards of trustees is also of concern. Overall however, this is a positive aspect of the bill as this provision seeks to improve the governance of Funds.
I however suggest that a period of time be allowed for incumbent trustees who do not presently pass the fit and proper test to acquire the requisite qualifications to serve as Trustees.
Further, the FIM Bill places a greater burden of responsibility on Trustees of Funds, where trustees who are judged to be negligent will be personally liable for a fine of up to N$ 5 million or a maximum prison sentence of ten years or both. There is a fear in the industry that this may scare away quality Trustees who might lose their livelihoods due to poor decisions taken while serving as a Trustee of a fund, especially legal practitioners.
Overall, I believe that the intension and purpose of the legislation is positive, as the Bill will replace outdated legislation and bring the Namibian non-banking financial sector in line with global standards, leading to greater development of Namibia’s financial markets.
However, concerns remain around the Bill’s complexity, timeframe for implementation, the discretionary powers granted to NAMFISA through subordinate legislation and the potential for higher cost of compliance to funds.

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