PFRDA set to modify regulations, tighten compliance

The Pension Fund Regulatory and Development Authority (PFRDA) has announced a slew of changes to Pension Fund Regulations, 2015, to simplify compliance-related measures and widen its subscriber net. As per PFRDA’s latest pension bulletin, NPS (exclusive of APY) had around 1.33 crore subscribers with a corpus of about Rs 6,849 crore.

Sponsors on radar
Some of the notable modifications in the draft circular include properly defining key managerial personnel’s, which will now include the CROs, CEOs, CFAs and CIOs. A CEO and CFO certification declaring the pension fund’s compliance with code of conduct, PFRDA Act, valuation guidelines and other regulations will also be mandatory in a scheme’s annual report.

The definition of a sponsor and business days are also set to change. While earlier, the NAV (net asset value) of each scheme was declared and calculated at the end of every business day, PFRDA has further proposed declaring the same at the end of such business day, within the time frame it will decide. 

Earlier, a sponsor meant any corporate entity which held at least 20% equity in a pension fund. Now, this threshold is set to rise to 20% or more paid up capital in the fund. 

Act as public companies

Previously, the sponsors had to incorporate the pension fund as a separate limited company under Companies Act, and had to ensure that it had a minimum net worth of Rs 50 crores, or any amount stipulated by the authority. 

The new proposal states that the fund will be registered as a normal company under the act, with its name clause specifying that it is a pension fund. It will also need to independently develop a robust IT infrastructure, cyber security procedures and dedicated employees within an year of the date since the registration certificate was issued to them.

They will also be required to set up committees pertaining to audit, remuneration, appointment and more. In effect, they will be required to meet all compliance criteria that apply to a public company under Companies Act, 2013. 

Moreover, PFRDA has proposed that no changes in management or ownership patterns that go over 5% of a sponsors/pension fund paid up equity within a financial year are allowed without prior approval of PFRDA.

Commencement at the earliest 

Every pension fund has to commence operations within 6 months of getting its registration certificate. A further delay of 6 months is allowed, provided reasons are provided in writing. Additionally, to deflect conflicts of interests, no director that is empaneled on the board of directors of one pension fund can be a part of another pension fund’s board of directors.