Zimbabwe: IPEC to Regulate Asset Managers?

The Insurance and Pension Commission Amendment Bill will require that asset managers secure IPEC's prior approval before providing services to clients within the sector, potentially adding a new layer of regulatory oversight.

Asset managers are currently regulated by the Securities and Exchange Commission of Zimbabwe (SecZim).

The Bill, which also seeks to expand IPEC's regulatory powers to include medical aid societies, establish new governance structures, create a policyholder, pensions and provident fund members protection fund, will require asset managers to secure IPEC approval before commencing services for insurance and pension sector clients.

Asset managers who are already serving clients in the insurance and pensions sector will require IPEC's approval to continue doing so.

Another requirement outlined in Section 4(g) of the Bill is that the regulatory body will be expected to initiate a fresh licencing or registration process, inevitably accompanied by associated fees and ongoing compliance demands.

IPEC's criteria for approval will encompass qualifications, experience, financial stability and adherence to specific operational standards, placing a heightened level of scrutiny on asset managers.

Furthermore, asset managers will be subject to continuous monitoring, with the potential for IPEC to revoke their operating authorisation, adding a layer of risk to their operations.

The new regulatory environment, analysts say, may inevitably increase the cost of doing business for the affected asset managers.

Adding to the regulatory complexity, section 4(c) of the Bill grants IPEC expanded powers to supervise not only insurers and pension funds but also their broadly defined "associates".

The definition includes subsidiaries, holding companies and any entity where the regulated institution holds a significant controlling interest.

The expansion of the regulatory reach means that asset managers deemed "associates" will fall under IPEC's jurisdiction, potentially creating a dual regulatory system alongside SECZ oversight.

The dual regulation may create an increased burden for many asset managers within Zimbabwe.

This broadened scope of "associate" and "control" could also result in asset managers requiring IPEC's approval before they can serve entities that are not directly in the insurance and pensions sector but are recognised as associates of entities in the insurance and pensions sector.

This may potentially result in asset managers losing business should they not meet IPEC's approval requirements.

Some market analysts say the new requirements would likely result in increased licencing, reporting and operational costs for asset managers.

They have noted that IPEC's new mandate to promote a "fair, safe and stable" sector and to conduct investigations, grants the commission significant oversight over asset managers. This means IPEC can scrutinise asset managers' investment strategies, risk management practices and client relationships.

It can also conduct investigations into potential violations of the IPEC Act or other relevant laws, which could lead to penalties or sanctions.

Asset managers play a critical role in the financial ecosystem, providing essential services to pension funds and insurance companies.

The services typically encompass investment management, portfolio diversification and strategic financial planning, all aimed at maximising returns and ensuring the long-term sustainability of these institutions.

Given the sensitive nature of the funds and their direct impact on the financial security of the citizens, the IPEC regulatory oversight is designed to safeguard the interests of policyholders and pension fund members, ensuring that asset managers operate within a framework of transparency, accountability and adherence to sound financial practices.

IPEC chairperson Mr Albert Nduna recently said the proposed amendments were a crucial step towards improving regulatory oversight, transparency and consumer protection.

"In an era of evolving financial landscapes, emerging risks and increasing consumer expectations, it is essential that the regulatory framework for this strategic industry remains robust, adaptive and in line with global standards," he said.

He highlighted that the Bill incorporated recommendations from the Justice Smith-led Commission of Inquiry on the Conversion of Insurance and Pension Values post-dollarisation, which has been a concern for stakeholders.

Source: All Africa