Cape Town — The Financial Services Board (FSB) plans to strengthen its grip by introducing enforcement tribunals able to impose administrative penalties and retrieve investors' money lost in reckless or fraudulent schemes.

Draft legislation to amend the Financial Services Board Act and the Protection of Investors' Funds Act was pending, the FSB deputy executive officer in charge of investment institutions, Dube Tshidi, told Parliament's finance committee yesterday.

The planned amendments would establish tribunals that could impose administrative penalties for the first time for noncompliance with all the laws under the jurisdiction of the FSB. The penalties would vary with the damage suffered.

Tshidi said the change would go a long way to countering perceptions that the regulatory body that oversees the financial services sector lacked teeth.

FSB CEO Rob Barrow told MPs: "Often we are not seen to be effective from an enforcement point of view."

The need for more enforcement muscle was highlighted by a string of financial scandals such as secret bulking profits by pension fund administrator Alexander Forbes, and the collapse of asset management company Fidentia through fraud and corruption.

In the past, the FSB has lacked the power to act swiftly against transgressors.

The only two legal remedies it has are to refer matters to the National Prosecuting Authority or to take away the licence of a financial institution.

It has had no administrative remedies in its arsenal.

At present, investors' money can be recovered by the FSB only through costly civil litigation.

The sum recoverable is limited. The guilty party paid back the stolen money plus interest, but with no administrative penalty, Tshidi said.

Establishing independent tribunals within the FSB would speed up the resolution of cases which now have to be handled by the overburdened National Prosecuting Authority (NPA).

The tribunals would be chaired by a retired judge and consist of independent experts. Their decisions would be subject to review by the high court.

The FSB-wide enforcement tribunal would take up cases investigated by FSB inspectors after on-site visits.

An enforcement tribunal was recently set up under the Security Services Act to deal with contraventions on the Johannesburg Securities Exchange related to insider trading, market abuse and false reporting.

This tribunal had so far successfully finalised one case and had two larger ones pending, Tshidi said.

"This enforcement tribunal story seems to be a success," he said.

He stressed that it would not render the NPA redundant in such matters, as it would still have the power to pursue criminal prosecutions. The FSB's Barrow noted that 6500 pension fund surplus apportionment schemes had been submitted with a further 6000 still awaited.

FSB chief financial officer Nosipho Molope told the committee that R23m would be rebated to insurance companies (R10m), pension funds (R10m) and collective investment schemes (R3m) this year because of the over-recovery of levies last year, which resulted in a net surplus of R61m.