The Planning and Budgeting Committee – Consideration of the Zambia Institute of Banking and Financial Services Bill, N.A.B. No. 22 of 2002

1.      PART I
PRELIMINARY PROVISIONS

Þ    CLAUSE 2 - Interpretation

·         Scope of the definition of “practitioner”:

“practitioner” means a person engaged in the core banking and financial service operation as that person’s main paid occupation, or possesses knowledge, training or experience in the field of banking or financial services, and is registered with a valid certificate issued in accordance with this Act.

·         This definition focuses on the individual’s “main paid occupation”, in the “core banking and financial service operation”. That definition is: “the main activities relating to the conduct of a banking and financial service which include customer acquisition, deposit taking, withdrawal processing, digital payment, treasury, loan and credit processing and any other activity as the Minister may, by statutory instrument, determine”.

·         It is well known that several other professions are involved in such work, such as legal practitioners and accountants. These professions are already heavily regulated under their respective statutes.

·         These definitions form the entire foundation of the Act as it seeks to regulate such “practitioners”. It is imperative to be clear that those professions already regulated should be expressly excluded from the scope of this Bill. Otherwise, there is a strong risk of jurisdiction overlap or contradiction, which will not be easily resolved using the tools of statutory interpretation.

·         Consider the inclusion of a section on “application”. It can provide that this Act shall not apply to professionals regulated by other legislation, regardless of whether they work in the banking and financial services sector.

·         No gap would result. Professionals who misconduct themselves are subject to internal discipline by their employer, civil and criminal proceedings, and their own professional regulations,

2.      PART II
THE ZAMBIA INSTITUTE OF BANKING AND FINANCIAL SERVICES

Þ    CLAUSE 4: Functions of Institute

·         Correct paragraph (a) of subclause (1) from promoting the profession and its “interest” to its “interests”.

Þ    CLAUSE 5: Constitution of Institute

·         Subclause (2) provides that the constitution “shall regulate” the affairs of the Institute. Subclause (3) provides a list of fundamental issues that should be so regulated through the constitution, especially since it is adopted by an absolute majority under subclause (1). Clauses 6, 7 and 8 follow through by requiring significant governance matters to be in accordance with the constitution.

·         Yet, subclause (3) provides that the constitution “may” provide for such governance matters. There should be no overall discretion. Paragraph (e) is a sufficient window for discretion in its allowing “any other matter as the membership may determine”.

·         Replace “may” with “shall” under the first line of subclause (3).

Þ    CLAUSE8: Council of Institute

·         We recommend the inclusion of a representative of the Bankers Association of Zambia on the Council. This may replace paragraph (d) of subclause (2) (“a representative of a bank”) and promote unity in the banking sector, rather than leaving them to compete for the slot on the Council.

·         Increase the disqualification under sub-clause (3)(a) from one year to five years. One year after being found guilty of  professional misconduct is   not enough time for “reformation”.

·         Specify, e.g. five years since conviction under paragraph (f) of subclause (3). If an individual can return to public office after five years from a conviction under section 49 of the Anti-Corruption Act No. 3 of 2012, it is a period that ought to be replicated throughout the law for consistency and in recognition that it is a sufficient period for reformation. In fact, section 49 expressly supports “reintegration” and clause 15 of this Bill implicitly does so as well.

Þ    CLAUSE 9: Functions of Council

·         Subclause (1) provides that the Council performs “executive functions”, followed by a list of corporate governance functions under subclause (2).

·         The Council is effectively the Board of the Institute. Boards should never perform “executive functions”.The “delegation of functions” under clause 10 does not remedy the anomaly.

·         Replace “perform the executive functions of the Institute” under subclause (1) with “provide strategic direction to the Institute”.

Þ    CLAUSE 11: Registrar and other staff

·         Clause 11(2) requires the Registrar to be a “practitioner”to whom the Act will apply. As subclause (1) makes clear, the Registrar is an administrator. It is therefore more important for them to have skills in management or business, rather than banking and financial services.

·         Remove the requirement for the Registrar to be a banking and financial services practitioner. Some criteria for appointment is useful, but it needs to be more relevant to the administrative nature of the position.

3.      PART III
REGISTRATION OF PRACTITIONERS AND ISSUANCE OF PRACTISING CERTIFICATES

Þ    CLAUSES 12, 13, 14 and 15: Eligibility to register and practice as a “practitioner”

·         We reiterate our comments in relation to the definition of “practitioner” under clause 2. These clauses make no exception for professionals already regulated under other pieces of legislation such as the Legal Practitioners’ Act, Cap 30, or the Accountants Act No. 13 of 2008, or any other statute under which the particular individual may already be regulated.

·         Amend the definition of “practitioner” under clause 2.

·         Include regulation under other legislation as a ground upon which registration is not required under this Act. This could be by amending Part III, or the addition of an “application” section under Part I to provide that the Act shall not apply to professions regulated by other laws.

Þ    CLAUSE 18: Suspension and cancellation of registration

·         Paragraph (c) of subclause (1) provides that conviction of an offence “under any written law” is enough for the Institute to suspend or cancel the registration of a practitioner if the sentence exceeds six months’ imprisonment without the option of a fine.

·         The problem with this extremely broad provision is that it applies even if the conviction has no connection whatsoever to banking and financial services. The requirement that the practitioner should be given a hearing first (subclause (2)) is, realistically, of little effect because they will probably already be incarcerated.

·         The regulation of a profession should be restricted to what directly affects that profession. That is why subclause (3)(f) of clause 8 only disqualifies practitioners who have been convicted of offenses involving fraud or dishonesty from standing as Council members. It is strange that the disqualification to be a Council member is less stringent than to be a registered “practitioner”.

·         Amend paragraph (c) of subclause (1) to specify that the conviction should be of an offense involving fraud or dishonesty, or any offense under the Act. The option of a fine (or lack thereof) is secondary to the nature of the offense. As with our recommendation in relation to clause 8, such conviction should have been within a period of five years from date of registration.

Þ    CLAUSE 19: Re-registration

·         There appears to be a contradiction between subclause (4) of clause 18 and clause 19. Clause 18(4) provides that re-registration can only be, “on conditions that may be prescribed.” Conversely, clause 19 provides that re-registration would be subject to, “the terms and conditions that the Institute may determine.”

·         There is an inherent conflict of interest in allowing the Institute to determine who to allow back into the profession. It is why, for instance, it is the Chief Justice who decides whether an expelled legal practitioner will be admitted back to the Bar and not the legal fraternity.

·         Delete subclause (4) of clause 18.

·         Amend clause 19 to provide that re-registration shall be in accordance with conditions to be prescribed.

Þ    CLAUSE 23: Suspension and cancellation of practicing certificate

·         Paragraph (b) of subclause (1) refers to conviction and imprisonment for more than six months without the option of a fine.

·         We reiterate our recommendation in relation to clause 18 and that the conviction should be of an offense involving fraud, dishonesty, or the Act.

4.      PART IV
DISCIPLINARY MATTERS

Þ    CLAUSE 34: Professional Conduct Committee

·         There is no minimum period of experience for any of the members of the Committee.

·         Committee members should have at least five years’ experience in their respective professions. The PCC is the gateway to the Disciplinary Committee and has significant powers of its own under clause 38. Greater care should be taken in its composition, in the same way the composition of the Disciplinary Committee under clause 39 was done with care.

Þ    CLAUSE 36: Functions of Professional Conduct Committee

·         The word “advise” under subclause (4) is grammatically incorrect.

·         Correct the word to “advice”.

Þ    CLAUSE 37: Proceedings of Professional Conduct Committee

·         Subclause (2) provides that three members shall form a quorum. This should be read with clause 34(1), which provides that the PCC shall be constituted by four practitioners and one legal practitioner.

·         The quorum must at all times include the legal practitioner. If that is considered impractical, the composition under clause 34 can be rebalanced to have two legal practitioners while the quorum of three PCC members is maintained, with at least one being a legal practitioner.

Þ    CLAUSE 38: Sanctions for practitioners by Professional Conduct Committee

·         The decision of the PCC must be in the same form as that of the Disciplinary Committee under clause 41, i.e. a reasoned decision or determination, in writing. That will support the option of an appeal under clause 49(1).

Þ    CLAUSE 39: Disciplinary Committee

·         Similar to clause 34 and the Professional Conduct Committee, the Council constitutes the Disciplinary Committee. However, unlike clause 34, there is no provision under clause 39 for the legal practitioners to be nominated by the Law Association of Zambia.

·         Amend the provision to include that the legal practitioners shall be nominated by the Law Association of Zambia. Otherwise, it would appear as though the Council can choose which legal practitioners on its own.

·         Paragraph (d) of subclause (3) appears to be a duplication of paragraph (c) of subclause (1) in terms of the ten years’ experience. Reconcile the duplication.

Þ    CLAUSE 41: Proceedings of Disciplinary Committee

·         Replace “judgment” with “determination” or “decision” under subclause (7). The Disciplinary Committee is not a Court. The term “decision” is used under clause 49(2). Consistency should be maintained.

5.      PART V
INSPECTORATE

Þ    CLAUSE 47: Power of entry, search and inspection

·         We are deeply concerned by the “arming” of professional regulators with Inspectorates and powers of entry, search and inspection. This is an alarming trend in all professional regulation statutes being enacted now.

·         It is, in our view, complete and unjustified over-regulation. We have already received several complaints from employers about such professional “Inspectorates” harassing them and purporting to exercise powers they do not possess. Such “Inspectorates” seem to have failed to understand that their role is not to regulate the sector in question, but the professionals who fall within their jurisdiction. It appears that the restriction of some powers to warrant from a Court has had little effect in curbing such abuse.

·         Additionally, the powers granted to “Inspectorates” create yet another opportunity for fraudsters. As much as such statutory provisions make impersonation an offense and require the provision of identity cards, some imposters are so sophisticated that they can easily convince unsuspecting targets of their apparent genuineness. It happens with Government Departments on a regular basis, and will not doubt soon spread to professional “Inspectorates” as well, if it has not already done so.

·         The banking and financial services sector is already heavily regulated by the Bank of Zambia and the many other financial sector law enforcement agencies. These are all directly part of the Central Government. They are not “private members’ clubs” of particular professionals.

·         The Bank of Zambia therefore has the mandate to conduct inspections, searches, etc. In the process of its doing so, it can verify whether the professionals employed in the provision of banking and financial services are appropriately registered and have annual practicing certificates issued by the ZIBFS. A separate “Inspectorate” is not necessary for ZIBFS, or any other professional regulator.

·         This legislative trend needs to end as it has a severely negative impact on the ease of doing business. The strong penalties of up to 500, 000.00 penalty units under the Bill and the power to issue administrative penalties under clause 52 are sufficient deterrents to non-compliance with the Bill.

·         Delete Part V. Find more appropriate ways of regulating professionals that does not give powers that should be reserved for law enforcement agencies established by the Republican Constitution.

6.      PART VI
GENERAL PROVISIONS

Þ    CLAUSE 49: Appeals

·         An appeal from a decision of the Disciplinary Committee under subclause (2) does not have a limitation period. This is anomalous for two reasons:

o   all of the other appeals under the clause have limitation periods; and

o   subclause (3) provides that a decision of the Disciplinary Committee will not take effect, “until the expiration of the time for lodging an appeal.”

·         Provide a definitive limitation period. Since thirty days is used for the other forms of appeal, thirty days is recommended for subclause (2) as well.

7.      FIRST SCHEDULE

Þ    PART II: Financial Provisions

·         Paragraph 7(2) allows the Institute to, “accept monies by way of grants or donations from any source in or outside the Republic.” There is no oversight of this ability.

·         The lack of oversight in the receipt of donations “from any source” for a professional regulator integral to the stability of the country’s financial system is dangerous. 

·         Except for Donations and grants from banking and financial institutions with the country, the rest  must be approved by the Minister.