An intensified war over the control of R7-billion of the Municipal Employment Pension Fund (MEPF) has taken a nasty turn.
Akani Retirement Fund Administrators administered many funds, including the MEPF.
Last year in October, the MEPF terminated the investment management mandate of the Cape Town-based asset management company, Mergence Investment Managers. The latter was mandated to invest R7-billion of the MEPF to various companies. This was in return of huge profits.
A letter sent to Mergence general manager Sholto Dolamo by MEPF’s board of trustees stated that the termination of the investment mandate was based on material discrepancies identified in the portfolios of the investment.
MEPF told Mergence that it was terminating the investment management mandate with immediate effect.
“You are instructed to cease all trading on the MEPF’s portfolios. [Mergence] will be notified in due course on the next step,” reads the letter from the MEPF’s board of trustees.
Possible class action lawsuit
Last week, a law firm, Ndou Attorneys Inc, made a call to MEPF members whose pension funds are administered by Akani to come forward. They were called to what appears to be a class action lawsuit to be taken against MEPF.
Ndou Attorneys claimed that the Financial Sector Conduct Authority (FSCA) has placed the MEPF under administration. This was due to the board not being properly constituted.
FSCA’s Retirement Fund Division said that the FSCA has concluded that the board of MEPF is not properly constituted. It also stated that’s the decision which is now the subject of a reconsideration application to the Financial Services Tribunal.
“The FSCA did not put the MEPF under ‘its administration’. …It has agreed to suspend the implementation of the decision to appoint a section 26(2) board in terms of the Pension Funds Act. This is pending the outcome of the reconsideration application by the Tribunal.”
Mergence lawyers, Werkmans Inc’s Rael Gootkin said that for a period of nearly 17 years, its client has effectively managed investments on behalf of MEPF. This in accordance with the fund’s investment strategy and in terms of investment mandate agreements.
“It must be noted that, during this time, the MEPF has not raised any complaints or concerns regarding Mergence’s stellar performance. Mergence confirms that it received a purported termination of its investment mandates. It said the termination is alleged to have originated from the MEPF. However, the purported termination is beset with irregularities and Mergence disputes its validity.
Mergence disputes validity of termination
“Mergence has raised the issues surrounding the alleged termination with the Regulatory Authority, being the FSCA. The composition of the board of the MEPF is already the subject matter of an investigation by the FSCA. This is in terms of section 26 of PF Act and subject to legal proceedings in the High Court. Mergence has also instituted review proceedings against the MEPF. This in relation to the alleged termination of its investment mandates in that Court,” said Gootkins.
“In light of the serious allegations raised regarding the MEPF board’s conduct in relation to the management of the fund, it is understood that a number of the MEPF members have intervened in the FSCA legal proceedings. [They have] taken exception to the conduct displayed by the current board of the MEPF in managing the affairs of the MEPF.
“We note that, having had sight of the annual financial statements of the MEPF for the previous five years, Akani has billed the MEPF an administration fee in excess of R1-billion. And it has charged a property management fee in excess of R600-million during this time, to the detriment of the members of the MEPF. This clearly also needs to be investigated by the FSCA. These processes and proceedings are currently ongoing. And in the circumstances it would not [be] appropriate to venture further comments in the media.”
Lawyers for 120 MEPF members
Phumudzo Ndou of Ndou Attorneys said: “On 4 October 2023, the MEPF received a ‘Notification in terms of Section 26 of the Pension Funds Act. In terms of the Notice, the FSCA, inter alia, purported to remove all board members of the MEPF’. …This (on the alleged basis that ‘the composition of the fund is not in line with the rules of the fund and section 7A(1A) of the PF Act’). It also indicated its intention to appoint a board in terms of section 26(2)(a) of the Pension Funds Act. The replacing of the board is in our view ‘administration’ as appears clearly section 7A of the PFA. It requires 50% of the board to be appointed by members.”
However, Ndou said that according to the notice published in the daily newspaper on April 30, there was no takeover that took place. And the notice published on behalf of its members did not suggest there was one.
“As stated in the notice, the MEPF, upon receiving the notice, applied to the Financial Services Tribunal for reconsideration of the notice. The MEPF and the FSCA then agreed to suspend the decision pending the reconsideration application. The reasons for the decision are set out in the decision attached. …[They also] appear from the record and further reasons given by the FSCA serving before the tribunal. We are currently acting on behalf of 120 members. And we were requested by our clients to inform other members of the position and invite them to participate in the pending proceedings,” said Ndou.
MEPF board denies talk of being removed
MEPF chairperson Peter Modike said: “It is not true that the MEPF was placed under administration. We have double-checked with the FSCA. As a board, we are still running the affairs of the fund as duly elected fiduciaries by the 26,000 members of the fund. Any assertion to the contrary is disingenuous. It must be rejected with the contempt it deserves. Any incitement of the membership of the MEPF will not succeed.
“As trustees, we have open channels of communication where members can raise issues openly. We have the capacity to address these issues as and when they arise. The Ndou Attorneys have no authority to deal with members’ issues. Nor are they a structure within the fund.
“Since Mergence was terminated, they tried to overturn the decision in court. However, when we submitted answering affidavits, they withdrew the case. But they are busy misinforming the members of the fund. We are making calculations to recoup the overcharged amount and claim it back.”
Akani chairman, Zamani Letjane said: “The Akani Retirement Fund Administrators strongly denies that the MEPF has been put under administration. This is a blatant lie by those hellbent to cause confusion and sow division among the MEPF membership. The fund is functioning properly with a duly constituted board of trustees.”
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