THE country’s financial services sector, especially the banks, should be on high alert given the recent focus on the sector by South African and international regulatory authorities.
On Thursday eight of the country’s major insurance companies might be in trouble with regulators after the Competition Commission said on Thursday that it had established reasonable suspicions that they might be engaging in collusive practices and price fixing.
This after revelations that the country’s major financial institutions risked having the country’s entire financial sector grey-listed internationally if they fail to adhere to Financial Action Task Force (FATF) regulations.
Commissioner Tembinkosi Bonakele announced in a statement that the Commission had on the day raided the offices of the companies in Gauteng, KwaZulu-Natal and Western Cape provinces after obtaining the search warrant from the Pretoria High Court, Durban High Court and Western Cape High Court.
The courts issued the warrant in terms of Section 48 of the Competition Act, which authorised the Commission to search premises and seize documents that had a bearing on its investigation.
“The search and seizure operation is part of the routine process of evidence gathering and we urge all involved to allow the investigation to run its course. The Commission will at an appropriate stage reveal the outcome of the investigation,” said Bonakele in the statement.
The companies which are suspected of wrong business practices are BrightRock Life; Discovery; FMI, a division of Bidvest Life; Hollard Insurance Group; Momentum, a division of MMI; Old Mutual Insure; Professional Provident Society and Sanlam.
“They are alleged to have engaged in collusive practices to fix prices and/or trading conditions in respect of fees for investment products such as retirement annuity and premiums for risk-related products, namely, life insurance cover such as dread disease cover/chronic medical condition cover, disability cover, life cover and funeral assistance benefits in contravention of section 4(1)(b)(i) of the Competition Act,” read the statement.
According to information at the commission’s disposal, these companies share information on premium rates for risk-related products and fees for investment products, “which enables them to adjust the prices of their existing and new insurance products”. The victims might be individual people who are policyholders and corporate policyholders that buy cover such as retirement funds or group life schemes on behalf of their employees.
The search and seizure is part of the commission’s investigation, which started in January 2021. The search targeted five sites in Gauteng, two in Western Cape, and one in KwaZulu-Natal.
“During the search, the Commission will seize documents and electronic data, which will be analysed together with other information gathered to determine whether these firms have contravened the Act,” the statement said.
This is not the first time that the country’s financial sector has been in the spotlight on claims of collusion.
The country’s major banks have been taken to the Competition Tribunal by the Sekunjalo Group, which has accused them of acting collusively against it and its related entities.
Sekunjalo wants the tribunal to make a prima facie finding on the banks’ collective boycott of its subsidiaries. It also wants the regulatory body to conduct a substantive investigation into the existence of such suspicion.
The Commission’s Bonakele has previously said that the country’s commercial banks have seemingly been undermining regulatory authorities in developing countries for a long time now by refusing to be held accountable by regulatory bodies.
Bonakele cited the example of the rand-manipulation saga where some banks such as Standard Chartered have admitted guilt to rand fixing in the United States but resist even pleading in their case in South Africa.