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Proposed changes to the PFRDA (Pension Fund) Regulations, 2015!
PFRDA (Pension Fund) Regulations, 2015 seeks public comments/feedback
1. The Union Budget 2023-24 announcement on comprehensive review of Regulations by the Financial Sector Regulators emphasized to simplify, ease and reduce cost of compliance.
The relevant paragraphs are excerpted hereunder: Para 99: Financial Sector Regulators
To meet the needs of Amrit Kaal and to facilitate the optimum regulation in the financial sector, public consultations, as necessary and feasible, will be brought to the process of regulation-making and issuing subsidiary directions.
Para 100:
To simplify, ease and reduce cost of compliance, financial sector regulators will be requested to carry out a comprehensive review of existing regulations.
For the above , they will consider suggestions from public and regulated entities. Time limit to decide the applications under various regulations will also be laid down.
2.The Regulations notified under PFRDA Act, 2013 have been formulated by the Authority after due assessment and with clear objective as provided in the preamble of each of the regulation. With the passage of time and changes in economic and technological landscape, these Regulations require review in order to make them more appropriate and effective.
Post Union budget 2023-24 announcement, review of Regulations has been initiated by the Authority to simplify for ease of doing business and to reduce cost of compliance while maintaining the basic tenets of the objects enshrined in the PFRDA Act, 2013.
The feedback from stakeholders including public consultations is at the core of review process while past experience gained in implementation of these Regulations is a guiding framework. The underlying principles of the review process are relevance, adequacy, clarity, effectiveness and above all protection of subscribers’ interest.
3.For this purpose, the Authority has constituted Working Groups consisting of the Head of the Departments with cross-functional teams to suggest changes in these Regulations.
To have a holistic approach and to ensure consistency, a Regulation Review Committee (RRC) consisting of WTM and EDs has been set up to review the proposed changes and suggest way forward.
An external Advisory Committee consisting of experts on financial and economic laws has been formulated to advice on the recommendations of RRC.
The internal process is followed by active stakeholder consultation and public comments.
4.As a first step, the internal review of the PFRDA (Pension Fund) Regulations, 2015 has been completed. The proposed changes are in the following key areas which aim at reducing the compliance cost leading to increased returns to the subscribers:
5.Simplification of Governance norms of Pension Funds (PFs) in line with Companies Act, 2013 based on enhanced disclosures for PFs: Directors’ Responsibility Statement, CEO and CFO Certification to be part of scheme financial statements which inter-alia includes declarations in respect of following key responsibilities:
6.Preparation and presentation of scheme financial statements to provide a true and correct view of scheme state of affairs and scheme NAV,
7.Adequacy and effectiveness of internal financial processes and digital architecture controls,
8.Compliance with PFRDA Act, PFRDA (Pension Fund) Regulations, Investment Guidelines, Valuation Guidelines, Stewardship code, voting policy and other applicable laws,
9.Adherence to Code of Conduct and Ethics.
10.Thrust on risk-based supervision.
III. Segregation of roles of sponsor & PF and simplification of compliance requirement including approval of change in management/shareholding pattern of sponsor of PF only in specific scenarios and only intimation in remaining scenarios.
1.Simplification of definitions and terms used in the Regulations such as Business Day, Compliance Officer, Key Managerial Personnel and Sponsor.
2.PFs to have additional committees of the Board such as Audit Committee and Nomination & Remuneration Committee. VI. The words “as may be specified by the Authority” used in the regulations have been proposed to be replaced with specific conditions wherever required.
3.The draft proposal is open for stakeholder consultation and public comments till 21 July 2023 and can be accessed on PFRDA website at Exposure Draft Section under Regulatory Framework Menu.
Comments/feedback can also be provided for any other provisions of PFRDA (Pension Fund) Regulations, 2015 where changes have not been proposed.
Comments/feedback may be sent by email at review-reg@pfrda.org.in with subject line as ‘Feedback on proposed changes to the PFRDA (Pension Fund) Regulations, 2015’. Reference may be made to the PFRDA website for existing Regulations notified in respect of different intermediaries in the NPS architecture.
Further explanation on the slew of other important changes ………….
The proposed changes to PF regulations also include segregation of roles of sponsor and PF and simplification of compliance requirement including approval of change in management/shareholding pattern of sponsor of PF only in specific scenarios and only intimation in remaining scenarios.
Some of the interesting proposals include stipulation that a director of a PF cannot be a director in the Board of any other PF; ensure that a pension fund is a ‘fit and proper person’; requiring a PF to commence operation within a period of six months from the date of grant of certificate of registration.
PFRDA also proposes to stipulate that the sponsor or the PF should obtain prior approval of PFRDA in case of amalgamation or merger or acquisition or take over by the sponsor leading to holding of equity stake by sponsor or PF in any other pension fund already registered with the authority.
This PFRDA move to bring changes to its PF regulations comes at a time when the pensions assets (NPS and APY) of the country are growing at frenetic pace of over 20 per cent and has touched a level of 9.8-lakh crore as of July 1 this year.
CONCLUSIONS
The passing of the PFRDA Bill has empowered the PFRDA with the necessary statutory authority to supervise and monitor the institutions of the NPS. Such a regulator can build trust in the system by ensuring that the interests of the NPS customers is the primary focus.
The Pension Fund Regulatory & Development Authority Act was passed on 19th September, 2013 and the same was notified on 1st February, 2014. PFRDA is regulating NPS, subscribed by employees of Govt. of India, State Governments and by employees of private institutions/organizations & unorganized sectors.
Proprietary blog of Karma Global
This blog has been collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, collection from various sources, for its monthly newsletter Issue 14 of August 2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – Kush@karmamgmt.com / yashika@karmamgmt.com