Although King III was only “launched” on the 1st of September this year we have to already start asking whether the Property Syndication is gearing towards the compliance of King III. That said it may even be extremely prudent to ask if they have ever been King I or II compliant. As the aim of the King reports was directly related to Public and Listed companies.
A lot has been said about the Property Syndication industry with a wave of allegations made against the operators. Some warranted and some maybe not. I believe that most of the attacks have been along the wrong avenue. We have seen some esteemed writers hammering the syndication industry about shareholder communication, so called inflated returns and poor and expensive management principles. Although these items are obviously extremely relevant and more than just idle points of discussion I believe that more emphasis should be placed on whether property syndication promoters subscribe to the King II and now King III rules of governance.
The basic reality is that most may not even know of the King reports. For example the directors of the now defunct Blue Everest Investments never even attempted to subscribe to King I and II and I believe that this was due to ignorance to its existence. Is that an excuse? I don’t think so, Asset Manager City Capital also never attempted compliance to King. Why not? Is it pure ignorance from the public, the promoters and from brokers alike? Is it that the so called governing body ,the Public Property Syndication Association better known as the PPSA, does not even mention compliance of King in their constitution? Or is it because we never demanded it?
In an industry that is bombarded by negative press brokers still keep selling their products and we are led to believe that it is merely the high commission being paid that motivates selling the products. I am however of the opinion that the concept behind the industry is solid and could be a fantastic investment for investors, but only if the syndication industry is more aggressively regulated by us, the public. Having an FSB number is no longer enough to protect the public, as clearly evident in the Capital Investments debacle. Capital Investments was/is a fully licensed Asset Manager and millions of rands are alleged to have been lost in this investment platform.
The focus for the immediate future should be to look at items like proper governance, ie. King III and the broker industry should demand compliance to these codes.
To find out more about the New Companies Act, King III and the Consumer Protection Act please visit www.sinkorswim.co.za
Monday, September 28, 2009
Monday, September 21, 2009
Are Financial Advisors ready for the new challenges?
The New Companies Act brings opportunity the Consumer Protection Act brings some additional strain whilst the proposed Protection of Private Information Bill will place additional strain on marketing methods and additional responsibility on database management within the financial services practice. This is a clear indication that 2010 and 2011 is going to be a very interesting time for financial advisors and business owners alike.
That said, I had to ask the question are Financial Advisors ready for these paramount changes and the opportunity and challenges that it holds. The extremely interesting part is in a quick survey, conducted with 40 companies that have attended the Sink or Swim Seminars, only about 15% of them had a active relationship with a financial advisors and most of these were merely related to pension funds and medical aids on not to any other business critical issues.
Even more over I was surprised that in a phone call to about 20 brokers only one offered business risk insurances, and I am not referring to asset insurance. Now the question I have is why don’t business owners have relationships with financial advisors and why don’t financial advisors focus on providing these key risk insurance instruments to their client base.
In recent years we have seen how the pendulum have swung in favour of the consumer and I have to wonder if Financial Advisors will now also be found wanting if their clients are not properly insured for these business critical risks. Never mind the massive opportunity that lies in this market segment.
That said, I had to ask the question are Financial Advisors ready for these paramount changes and the opportunity and challenges that it holds. The extremely interesting part is in a quick survey, conducted with 40 companies that have attended the Sink or Swim Seminars, only about 15% of them had a active relationship with a financial advisors and most of these were merely related to pension funds and medical aids on not to any other business critical issues.
Even more over I was surprised that in a phone call to about 20 brokers only one offered business risk insurances, and I am not referring to asset insurance. Now the question I have is why don’t business owners have relationships with financial advisors and why don’t financial advisors focus on providing these key risk insurance instruments to their client base.
In recent years we have seen how the pendulum have swung in favour of the consumer and I have to wonder if Financial Advisors will now also be found wanting if their clients are not properly insured for these business critical risks. Never mind the massive opportunity that lies in this market segment.
Wednesday, September 16, 2009
2010 and beyond
Nostradumus, in his lost book of images, allegedly predicted the end of the world and humankind in 2012. Although I am no psychic nor do I care much for predictions it does not take much psychic powers to predict the end of the business world as we know it in 2010 for South African business people.
The promulgation of two critical acts namely the Consumer Protection Act and the New Companies Act does change everything we know about corporate and business law in South Africa but even more over the more aggressive prosecution of the Employment Equity Act and the criminalisation of the Competitions Act is also set to make your life as company director more strenuous and just plain scary.
It is rumoured that the commission has been instructed to fine a minimum of 270 companies during 2010 for non compliance to the Employment Equity act and to prosecute aggressively whilst critics believe that the criminalisation of the competitions act will have extremely negative effects on business. Another portion of the New Companies Act is Section 6,Business Rescue and Compromise with creditors, and I am off the opinion that it will have a massive impact, at least in the short term, on the credit environment in South Africa. Where does this leave company directors?
Simply it places a huge burden on company directors and officers and does open them to a tsunami of potential litigation, regulatory fines and stakeholder scrutiny. Therefore I am of the opinion that Financial Advisors are going to play a more vital role in the daily business life of directors. In a recent “survey” done by Sink or Swim only 15% of the respondents have a trusted and active relationship with a financial advisor. Similarly in a couple of phone calls to brokers it became apparent that they do not offer nor understand business and intangible insurance products that they require.
Now the important questions that we need to answer is, can I as a financial advisor be held liable if my clients business is not properly insured for these risks? Is it the prudent move to avoid the issue? Am I ready for the changes? Financial Advisors already have a tough time with the need to comply to FICA, POCA, FAIS and soon the consumer protection act. How will this impact your business and the inherent risk that you take in your daily activity.
To find out more about the New Companies Act and the Consumer Protection Act visit http://www.sinkorswim.co.za/
The promulgation of two critical acts namely the Consumer Protection Act and the New Companies Act does change everything we know about corporate and business law in South Africa but even more over the more aggressive prosecution of the Employment Equity Act and the criminalisation of the Competitions Act is also set to make your life as company director more strenuous and just plain scary.
It is rumoured that the commission has been instructed to fine a minimum of 270 companies during 2010 for non compliance to the Employment Equity act and to prosecute aggressively whilst critics believe that the criminalisation of the competitions act will have extremely negative effects on business. Another portion of the New Companies Act is Section 6,Business Rescue and Compromise with creditors, and I am off the opinion that it will have a massive impact, at least in the short term, on the credit environment in South Africa. Where does this leave company directors?
Simply it places a huge burden on company directors and officers and does open them to a tsunami of potential litigation, regulatory fines and stakeholder scrutiny. Therefore I am of the opinion that Financial Advisors are going to play a more vital role in the daily business life of directors. In a recent “survey” done by Sink or Swim only 15% of the respondents have a trusted and active relationship with a financial advisor. Similarly in a couple of phone calls to brokers it became apparent that they do not offer nor understand business and intangible insurance products that they require.
Now the important questions that we need to answer is, can I as a financial advisor be held liable if my clients business is not properly insured for these risks? Is it the prudent move to avoid the issue? Am I ready for the changes? Financial Advisors already have a tough time with the need to comply to FICA, POCA, FAIS and soon the consumer protection act. How will this impact your business and the inherent risk that you take in your daily activity.
To find out more about the New Companies Act and the Consumer Protection Act visit http://www.sinkorswim.co.za/
Friday, September 11, 2009
The New Companies Act opens opportunity for Financial Advisors
The New Companies Act, due to be promulgated in 2010, is changing the face of corporate business in South Africa and as we all know change brings opportunity. The aim of the act is to modernise and streamline current outdated legislation as well as promoting good corporate governance in association with King III which is now applicable to all entities.
The New Act also places a very strong emphasis on continuity planning and liquidity of a company as well as allowing stakeholder scrutiny for the extraction of capital from a company. This places a much larger emphasis on company insurances and company investments.
Insurance: Traditionally people insure tangible items a lot easier than the intangible ones. Although the act does not radically change the role of directors it does bring to the forefront the roles and responsibilities. “New” needs that will be more evident to directors will for example be Key Man insurance, Litigation Insurance and Contingent Liability Insurance. Business Rescue will also make directors view Credit Insurance with a much more positive view.
Investments: Traditional investment products will now also play a much stronger role in the mind of the smaller business owners as items like deferred compensation for key management and staff as well as capitalisation plans will be taken a lot more seriously.
Whilst The Consumer Protection Act will place more pressure on brokers and insurers the New Companies Act opens up a more responsible client to the insurance broker.
To learn more about the New Companies Act and King III visit www.sinkorswim.co.za
The New Act also places a very strong emphasis on continuity planning and liquidity of a company as well as allowing stakeholder scrutiny for the extraction of capital from a company. This places a much larger emphasis on company insurances and company investments.
Insurance: Traditionally people insure tangible items a lot easier than the intangible ones. Although the act does not radically change the role of directors it does bring to the forefront the roles and responsibilities. “New” needs that will be more evident to directors will for example be Key Man insurance, Litigation Insurance and Contingent Liability Insurance. Business Rescue will also make directors view Credit Insurance with a much more positive view.
Investments: Traditional investment products will now also play a much stronger role in the mind of the smaller business owners as items like deferred compensation for key management and staff as well as capitalisation plans will be taken a lot more seriously.
Whilst The Consumer Protection Act will place more pressure on brokers and insurers the New Companies Act opens up a more responsible client to the insurance broker.
To learn more about the New Companies Act and King III visit www.sinkorswim.co.za
Thursday, September 10, 2009
Consumer Protection Bill and the Services indusrty
The Consumer Protection Bill will set the benchmark in responsible marketing for service providers in South Africa.
The consumer protection Act, due to be promulgated in October 2010 in South Africa, is aimed at setting a national benchmark for high standards of marketing and responsible sales and advertising. The act affords a myriad of protections to the consumer with a strong emphasis on the previously disadvantage participants that have been exploited by some business sectors.
Companies providing service to the public have to start now to get themselves in line with the new Act as the consequences of not being in line could be dire.
The consumer protection Act, due to be promulgated in October 2010 in South Africa, is aimed at setting a national benchmark for high standards of marketing and responsible sales and advertising. The act affords a myriad of protections to the consumer with a strong emphasis on the previously disadvantage participants that have been exploited by some business sectors.
Companies providing service to the public have to start now to get themselves in line with the new Act as the consequences of not being in line could be dire.
Just some important provisions in the act for service providers
- A contract would be interpreted in favour of the consumer, in the event of ambiguity allowing for more than one reasonable interpretation. Although this reflects the existing law, it is now an unalterable right.
- Any exclusion within the contract would be measured against whether a reasonable person in the position of the consumer would have expected such exclusion, taking into account the contract's contents, the manner in which it was presented and the circumstances around concluding it. Contract exclusions must to be drawn to the consumer's attention.
- Service Providers will not be allowed to take advantage of the fact that the consumer is unable to understand the terms of the contract being concluded with it as a result of either physical or mental disability, illiteracy, ignorance or inability to understand the language of the contract.
- The Terms of the contract may be ruled as unfair, unjust or unreasonable if they are excessively one sided, contain terms so adverse to the service provider as to be inequitable, or if the consumer was misled by the service provider company.
The terms of the contract must be in writing and in plain language (see definition of plain language at bottom).
In conclusion, the New Companies Act places a huge responsibility on service providers to act responsibly with there consumers and to ensure that all contracts are easily understandable and properly explained.
To find out more about the New Consumer Protection Act visit www.sinkorswim.co.za for seminar dates.
Plain Language – In essence plain language means that you should write documents (advertising or other) in such a manner that it can be understood by the lowest potential target market.
Wednesday, September 9, 2009
King III Anounced
“Governance in the past was about board effectiveness, currently it is risk management whilst the future of governance is King III” Lindie Engelbrecht of IODSA (Institute of Directors South Africa).
On the 8th of September Webber Wentzel in association with IODSA gave us a brief overview on the newly launched King III and the methodology and mindset behind creating it. The two most powerful messages, in my humble mind, was the fact that King III has taken an “apply or explain” approach and the fact that we in South Africa will now enter into an “All inclusive stakeholder environment”. The key question is was does this mean.
Apply or explain effectively destroys the “tick the box” concept as was the norm in compliance and governance. This change in mindset from “do or else” is definitely an aim at giving governance a more positive approach. The part that I personally enjoyed the most was the fact that it now forces company officers and directors to actually think about every aspect of King III in their compliance. Thus not comply or explain, but the apply your mind and explain what and how you did it.
It is international standards that all stakeholders in companies are regarded as important in the business. However the shareholders rights come first !!! The New Companies Act changes that all together. All stakeholders are now equal and their rights are protected in line with Constitution and the Bill of Rights.
Overall King III is not only a new international benchmark in corporate governance but also a progressive look at responsible directorship and elevating the position of directors into a more and more professional world.
Fore more information about King III and The New Companies Act please visit www.sinkorswim.co.za
On the 8th of September Webber Wentzel in association with IODSA gave us a brief overview on the newly launched King III and the methodology and mindset behind creating it. The two most powerful messages, in my humble mind, was the fact that King III has taken an “apply or explain” approach and the fact that we in South Africa will now enter into an “All inclusive stakeholder environment”. The key question is was does this mean.
Apply or explain effectively destroys the “tick the box” concept as was the norm in compliance and governance. This change in mindset from “do or else” is definitely an aim at giving governance a more positive approach. The part that I personally enjoyed the most was the fact that it now forces company officers and directors to actually think about every aspect of King III in their compliance. Thus not comply or explain, but the apply your mind and explain what and how you did it.
It is international standards that all stakeholders in companies are regarded as important in the business. However the shareholders rights come first !!! The New Companies Act changes that all together. All stakeholders are now equal and their rights are protected in line with Constitution and the Bill of Rights.
Overall King III is not only a new international benchmark in corporate governance but also a progressive look at responsible directorship and elevating the position of directors into a more and more professional world.
Fore more information about King III and The New Companies Act please visit www.sinkorswim.co.za
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