Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746814322.pdf (Namibia)
PDM Popular Dem.oeratic Movem.ent OFFICE otIlce 154, Southern Wing, Parllauaen~ Bulldintr, Love S~reet, Central Buslne_ District, Windhoek Tel: +264 61 288 2&63 Fa.x2E: +264 886 667 471 Email: pcbnnamibia@gnaail.com SPEECH BY HON NICO SMIT ON THE FINANCIAL INTITUTIONS AND MARKETS BILL, 2019 15 October 2019 Hon Speaker, Hon members, While it seems in order for me to felicitate the Hon Minister for tabling a piece of legislation which has been in the making for to having certain serious over ten years, reservations about this bill.
I must admit On the surface, it is a monumental accomplishment and the first attempt to consolidate and synchronise an extensive body of individual acts, many of which have become outdated, or were contradictory where it pertains to some specific legal definitions and applications.

in our However, you all need to ask yourself this question: current do we want very negative economic situation, legislation that makes the downswing worse, or do we need laws that promote economic growth?
In the light of this question, please allow me to point out and the reservations to which I have referred.

These discuss include 1 2 :1.. • '.
• the fact that the bill is clearly a means of providing an income for Namfisa at the expense of the various financial institutions; the danger that when the regulator, Namfisa runs short of funds, the bill creates the ideal conditions for it to increase its revenue by wringing the funds it needs out of the private sector; r • vast discretionary powers for the regulator are explicitly conferred on the regulator without granting the affected company or individual any recourse; that '-/.
• the danger of the entire bill coming fully into operation on a single date and thereby causing chaos in financial markets; the punitive and not market supportive approach of the FIM Bill; <" • ,.
• the exponen tial increase in the reporting load on compames; r • the many existing legal prescriptions on prudence, diligence, trust and governance that make the bill clearly redundant; Hon Speaker, allow me then to start by turning my attention to Namfisa, the body that clearly stands to reap the greatest advantage from this new bill.

In my opinion there is little or no advantage in it for the citizens of our country who make use of financial institutions.
As the principal agent behind the bill's drafting, I am sure Namfisa is eager for this bill to become law.

It gives them wide powers and authority, and I counted no less than 128 clauses describing penalties, fines and even imprisonment, on top of the myriad fees and levies intended to support the regulatory machine.

In fact, the cash-generating efficiency of the bill is so pervasive, on some pages I found as many as three different types of penalties or fines.
2 is to be commended that upon tabling, the Minister It specifically sold us the FIM Bill on the one over-arching regulation has this novel piece of financial principle that shifted from a risk -based assessment of liabilities and infringements.

It may be a slight oversight on his side, but the bill itself rather testifies to a fees- based supervisory structure regulatory control the state may deem necessary.
to effect whatever rules- based approach to a As the incumbent regulator, with these new sweeping powers over the engine of the economy, Namfisa will now be in a position to override market principles, deciding who or what may participate in the market, and under what provisions.

In effect, the FIMBill gives them the power to determine the entire market, excluding the banking industry.
One of the first discrepancies in the formative phase of the bill that I picked up, is the honourable Minister's reference in his tabling speech to the input from international experts and technical assistance from the International Monetary Fund.

Namfisa, however, disputes this.

In a response issued by the minister on 11 December 2018 on concerns raised by the industry, Namfisa stated that the bill was drafted locally and only reviewed by international experts.
When I consider the content and the bill's vast scope, I am trying to match the regulator's in-house capacity to the output, and I come up short when it comes to local It would be very enlightening if the Minister could inform us exactly which individuals/experts at Namfisa drafted this bill.

skills.
skills.

to both the Minister It must have been a huge embarrassment and Namfisa, that hardly a week before the bill was due to be discussed in parliament, Namfisa's office staff took to the toy-toying and protesting, demanding an 80/0 salary streets, increase, when every single person in that institution knows there is no public money available.

Unfortunately for the 3 regulator, incident in Independence Avenue on that Monday.

this is not hearsay.


I personally witnessed the The audacity of this form of entitlement scares me since it testifies to an attitude that whatever the government cannot provide, the regulator will milk from the industry through the web of levies and fees to be found in this bill.

And the danger is, once the regulator runs short of funds, the bill creates the ideal conditions that it can simply increase its revenue by going on a witch hunt to wring the funds it needs out of the private sector.
raises action at furthermore the regulator Industrial the unsettling suspicion that it is overstaffed, incompetent and at it is supposed to loggerheads with the private sector that regulate to the benefit of the economy, and for the protection of consumers.

These are not just off-the-cuff remarks, they are the based on what regulator and its inability to foster a conducive environment for financial services to grow.
the FIM Bill blatantly advertises about Conditions and Suspensions Digesting the entire bill is an arduous task but it is only by reading the whole document that one realises the enormity of the undertaking to consolidate the legislation for at least seven sub-sections in the broader financial services industry.

Since it is the bill's intention to consolidate the regulatory effort for every single aspect of financial services other than the formal banking industry, it is b nature re etitive.
Fortunately the frequent repeating of similar conditions for different sub- sections also makes the bill relatively easy to understand.

What I noticed is that the first sections of every chapter usually start with restrictive conditions in the style that more conventional legislation ty'pic'!ll~doesl;.Thisis then followed by 4 conditions a number of exclusions and suspensions, overriding the fairly strict establishi!1&...vast.

and in the process, discretiona owers for the regulator.
These powers are not imp ied, they are explicitly conferred on the regulator wi.

!,hout JQ"~ting recours~ to the affected company or individual.

Of course, this makes one wonder, why the restrictive, almost dogmatic approach to each of the sub-sections in the first place, when these are relaxed only a page or two later?
There is only one answer and that is to empower the regulator to be action it deems necessary to able to define and implement ~y compliance, not with the tillI, but with its own ensure r~gulatory effort.

Implementation implementation of its various chapters.

~e I was greatly relieved to read that the bill itself makes provision for the gradual the bill to be enacted and promulgated all at once, it would lead to massive administrative disruption on the part of service providers.
This would be particularly exacerbated during the first year after promulgation since the bill forces compliance with the prescribed registrations and this ID"ustall be done within twelve months after promulgation.

If it is this House's intention that the bill must be promulgated .- ----- despite the concerns about its impact on the financial services industry, it is done the various inc[.ementaJ.ly, chapters so that there will be a period of at least six months between any two enactments.
least recommend that enactment then I would at stcaggeripE the of If the entire bill comes fully into operation on a single date, I share the industry's it will create a severe adminjstrative bottleneck on Namfisa's part, which will have a their material impact on the way service providers conduct concerns that 5 v daily business, especially if the time allowed lapses and companies find themselves outside the law not due to anything they have done or omitted, but direc~ as a result of ~d compliance.
- ..--- Unbundling It was a big relief to learn from the hon Minister that the FIM Bill is the result of an unbundling process of the first draft which still included the legislative frameworks for matters institutions ®d pertaining to Namfisa itself, in!..ermediarfes,the fmancial services adjudicator, usury and credit agreements.
financial I want to sincerely advise this House to urge the hon Minister to continue the unbundling process, devolvingthe current FIM Bill into seven distinct bills for the seven types of service providers, a separate bill to codify and regulate the role of to move chapter 9 on property in trusts to the administrators, existing legislation on trusts and to add chapters 10 and 11 to the Namfisa Bill proper which is currently also before this House.
I want In particular, to direct your attention to Part 5 of Chapter 10 of the FIM Bill which lists roughly 227 clauS$s authorising Namfisa to set supervisory standards.

This is in addition to their other vast statutory powers to issue guidelines, bulletins, rules, directives and any other measure the regulator may deem necessary.

Cementing Namfisa's statutory powers requires more than 19 pages of the entire bill, indicating without doubt g.pproach is punitive and not market suppor~.
·ll's foundation the E that Supervisory control 6 I The FIM Bill suggests that its drafters realised the enormous fails in its consequences that will arise WIlen the r;gufator that mdate.

supedmpos~ regulatory compliance and its execution on private sector service providers.

For this reason, the bill is_awasb..~s ~ ,.


"..- This increases the reporting load on companies exponentially, which ultimately will !ead to...:::an<- increase in administrative ..,sg.st~Given that all the regulated entities are custodians of it translates directly to an their clients' or members' funds, thereby r~ducing .the encumbering of available resources, the FIM Bill is _ benefll.

to those people in whose interest supposed to work.

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"> -- On...top Q,fthe substantia] increase in both Qumber and v~e this jncreas~ in administrative of the e~sting Namfisa levks, financial burden on service costs constitutes an additional providers, which together with the standard levies and fees reduces the benefits for clients and members.

.

.. - talfe into consideration the_ cost .gf The FIM Bill.
does not supervisory cor:uru.iance.ItLunilaterally imEQ§.esa web of ad"ditional costs and potential penalties, all of which will have to ~d to the operating co.§1sof the service providers.

The market for savings aria insurance has a set size which will not economic duress, change significantly under clearly implying that all a.d.djtjonal costs will be to the detriment of the ordinary man in the §.treet.
the current Self-regulatory industry the FIM Bill does not take into account that It seems that in essence Financial Services are a self-regulating industry.

Given exi~ng let?alprescjjpjions on..nn~e, the .~ trusS and &.overn~gce, the redundancy of the bill is ~ldglt.
~ence, 7 Fina~cial services are further regulated by the Plincigle~ of~ ;;z tn~: If service providers are not profitable, they go under and disappear from the financial landscape, usually with a transfer of assets to another institution that is better able to manage benefits on behalf of clients or members.

leads to a siphoning away of their client base, In the third instance, service providers are regulated by competition.
If they overprice their products or their services, thus it essentially protecting the interest of the client.

The industry any purpose other than to ensure d<;esnot neeo_a r~for participants.

This only that requires a"l!ii=ni~ form ~f regulatipn and noS...a ~e and restrjctj&.e framework that inhibi-bs the ability of service Providers to oifer..affQ!

:dab!eproducts and services to the -" largest possible portion of the population.
the playing field is lr;yel for ~ ~ Conclusion I strongly advise this august House not to approve the FIM Bill as tabled.

It needs to be unbundled further and it needs to take into consideration, as its primary concern, the longevity and vitality of the financial services industry.
the tabled Namibia Financial Secondly, I want to advise the Hon Members that we also take a hard look at Institutions Supervisory Bill so that the supervisory powers of the regulator are restricted and limited to critical issues that have an impact on the market, on financial stability, and on systemic risk.

Namibia is at a phase where it need~Jess regulation,_not mOfE./I/ This was clearly stated by the IMF when it considered the' parlous state of our economy a few weeks ago.
~/( \0" The markets are functioning well even if the government's finances are in shambles.

The regulatory supervision on the banking system by the Bank of Namibia provides nearly all the 8 supervision the industry needs since every transaction or contractual obligation that Namfisa intends to regulate, has to pass through a bank account at some point.

In the third instance, it is my considered opinion that the FIM the interest of the user of Bill will do very little to protect financial services, i.e.
the consumer or the ordinary man in the street.

Instead, it will add a substantial additional financial blll]ief4.on all service providers without necessarily limiting or preventing any criminal activity that may be to the detriment of the client.

- ...- - Finally, I believe that the FIM Bill in its current format will inhibit savings which essentially are the backbone on which the development of the Namibian economy depends.
The Namibian economy is known for its high per capita level of or and savings, be that reduces savings, constitutes another form administrative, of consumption but in this case, not hel~g the economy to gro~ but rather slowing it down even more, Unless you work for Namfisa, of course.
impediment, legislative any it In the light of the above arguments, Hon Speaker, Hon Members, I believe that there is more work to be done on this very restrictive bill if this august house wishes to protect the Namibian public from a further downswing in our economy.

I therefore urge the Hon Minister of Finance to withdraw this bill for further scrutiny and consideration.

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