The High Court has affirmed the wide supervisory powers of the Financial Sector Conduct Authority while simultaneously ruling that the Authority acted unlawfully in exercising those powers against the Municipal Employees Pension Fund (MEPF) in the lead-up to the Fund’s general meeting on 11 December.
The MEPF serves about 100 000 active and retired members, managing assets valued at some R28 billion.
In a judgment handed down on 10 December, the Court reviewed and set aside two FSCA decisions relating to the general meeting, finding that the Authority had not met the statutory thresholds required to compel unredacted election records or conduct an on-site inspection of the meeting.
The case arose after the FSCA launched an urgent application to enforce supervisory measures it had invoked under sections 131 and 132 of the Financial Sector Regulation Act (FSRA).
The MEPF, its principal officer, and its administrator, Akani Retirement Fund Administrators, opposed the application and filed a counterapplication to have both decisions declared unlawful.
The High Court in Johannesburg heard both matters together on 5 December because of the imminent meeting on 11 December.
The two notices
The trustees are elected at the Fund’s triennial general meeting – half of whom must be directly elected by members. The election process begins at the municipal level, where local managers submit returns detailing elected representatives, before convening at a central venue for the final vote.
According to the judgment, the FSCA and the MEPF were involved in “protracted engagement” throughout 2025 concerning preparations for the trustee election.
In September, the FSCA issued an exemption under section 13 of the Pension Funds Act allowing the Fund to hold its general meeting by 11 December. In early October, the parties entered an enforceable undertaking in which the Fund agreed to certain preparatory steps, including the timeous submission of municipal election returns.
The Authority later expressed concerns about whether the election processes were being conducted lawfully and, between late October and mid-November, issued two statutory notices. These became the subject of the litigation.
The first notice, issued under section 131 of the FSRA, instructed the MEPF to provide unredacted municipal returns indicating which individuals the municipalities had nominated to represent them at the general meeting. The MEPF had provided redacted versions of these returns, but the FSCA maintained it required full identifying details to verify the legitimacy of the nomination process, to ensure that elected representatives were eligible, and to assess compliance with the enforceable undertaking.
The MEPF objected, stating it had disclosed all information necessary for regulatory oversight while protecting personal data and complying with legal obligations arising from the objections of several municipalities.
The second notice authorised the FSCA, under section 132, to conduct a supervisory inspection at the general meeting. The Authority stated this was necessary to ensure that the election of trustees complied with the Fund’s rules and the statutory requirements.
The Fund opposed the measure, arguing the decision was unlawful, unsupported by the facts, and procedurally unfair. It contended the FSCA had not explained why such an intrusive measure was needed so close to the date of the meeting.
Court affirms the scope of the FSCA’s statutory powers
The Court expressly confirmed that the FSCA does have the statutory authority to request election-related information and to conduct inspections at a retirement fund’s general meeting, provided the regulator meets the conditions set out in the FSRA.
“Section 131 is capable of extending to election-related documentation where such information is reasonably necessary for supervisory purposes, and section 132 may in principle authorise an on-site inspection at any venue at which a pension fund conducts its business, including a general meeting convened for the election of trustees,” said Acting Judge Don Mahon.
This interpretation confirms that the FSCA’s supervisory mandate is not confined to financial reporting or ordinary business records, and oversight may extend to governance processes such as trustee elections.
Unredacted returns not shown to be necessary
Although the regulator’s powers were confirmed in principle, the Court held that the FSCA had not satisfied the statutory thresholds required to exercise them in the circumstances of this case.
Under section 131, the FSCA had to demonstrate that the information demanded was “reasonably necessary” for supervisory purposes. The Court held that the Authority had not met this requirement.
The MEPF had already supplied redacted returns indicating the number of delegates and the municipalities’ compliance with the nomination process. The Court found the FSCA had not explained why unredacted versions were indispensable or why its concerns could not be addressed through less intrusive means.
The Court also noted the privacy concerns raised by municipalities and the lack of engagement by the FSCA on these issues.
Inspection decision lacked relevant and substantiated reasons
In assessing the section 132 notice, the Court found the FSCA had not disclosed all the grounds on which it relied. Other grounds related to events in 2021, which the Court noted had been overtaken by the outcomes of prior Financial Services Tribunal proceedings.
“Several of the grounds relied upon were irrelevant or unsubstantiated; others were premised on allegations the substance of which was not disclosed. The cumulative effect was a decision that bore no rational connection to the statutory purpose, was procedurally unfair, and therefore unlawful,” Mahon AJ said.
The reasons provided by the FSCA were insufficient to justify an intrusive inspection of the Fund’s general meeting, the Court held.
The Court observed that the FSCA had been engaging with the Fund for several months, yet issued the inspection notice only in mid-November, shortly before the meeting. The regulator did not explain the delay. The judgment states that this timing disadvantaged the Fund and contributed to the procedural unfairness of the FSCA’s actions.
Decisions set aside
The Court reviewed and set aside both decisions and ordered the FSCA to pay the respondents’ costs, including the costs of two counsel.
Mahon AJ said the Court’s finding does not restrict the FSCA’s ability to invoke sections 131 or 132 in future where a proper factual and statutory foundation exists.
“It does, however, preclude reliance on supplemented reasoning to revive the impugned decisions in relation to the imminent December meeting, which will by then be a spent event. Any future exercise of these statutory powers must concern a new occasion and must satisfy the requirements of lawful, rational, and fair administrative action.”
MEPF’s response
In a statement issued after the judgment, the MEPF described the outcome as a “landmark ruling” that “vindicated” the Fund.
The Fund described the FSCA’s intervention as “overbearing” and asserted that the redactions had been necessary “to maintain electoral integrity”.
The MEPF said “this crucial ruling” not only ensures that the FSCA acts responsibly and within the law but also holds it to account, “marshalling it to not be both referee and player in the discharge of its mandate”.
Although the FSCA is entitled to ensure that trustees are properly elected and the board is lawfully constituted, “it still needs to meet jurisdictional requirements that the specific information sought is reasonably necessary for the statutory purpose identified”, the MEPF said.
