1. Introduction
On 13 January 2019, the law transposing the IORP II directive came into force. Many IORPs reviewed and modified their governance systems in line with the new legal provisions. Since 2019, the status of the Compliance officer has also been further embedded in law. From 2019, the appointment of the Compliance officer must be pre-approved by the regulator, the Financial Services and Market Authority (FSMA). Prior approval ensured that a candidate with a legal background was appointed as Compliance officer because of the Compliance officer's job description, which is to ensure that the IORP complies with the legal and regulatory provisions applicable to its activities and the pension schemes managed by the IORP and the IORP's internal policies. This article takes a closer look at the Compliance officer's task as a control function and, more specifically, the annual check-up of an IORP's corporate governance. It is a must-read in January to ensure that the IORP can start the new year with the necessary good intentions.
2. Governance evaluation
In the practice guide published on 14 December 2021 by FSMA on its website, we read that a governance evaluation must take place every three years to ensure the IORP's corporate governance. In doing so, the FSMA expects the IORP to evaluate the appropriateness of key documents, policies, their implementation and the monitoring of their application. Some topics to be addressed are also explained, including governance structure & organisation, internal control system, etc. This review is based on Article 76/1, paragraph 3 of the Belgian IORP Act where it is stated that this review should be done every three years. Consequently, if the IORP has established or revised the governance system in 2020, this review should be done in 2023.
3. Appointments
Of course there are also some annual check ups. It is recommended to annually review the appointments of the board of directors, operational bodies and key functions by means of an overview. This overview includes the start date, if necessary the contract date (when the contract with the person involved commenced, mainly with respect to key functions) and the end date of the appointment. This will help avoid the appointment process not being completed in time. For appointing members of the board of directors, operational bodies or key functions, a period of three to four months should be taken into account to complete the entire appointment process. Thus, the necessary deliberations during the board of directors (possibly the awarding procedure or comparing fee quotes, compliant with the outsourcing policy) must take place, the necessary questionnaires on appropriate expertise and professional reliability (fit & proper) must be completed, as well as obtaining prior approval from the FSMA. It is also important to check that all new appointments or previous dismissals of members of the board of directors or the external auditor have been published in the Belgian Official Gazette. In the case of key functions, a review of the contract may be required. A legal screening may be the best way forward.
4. Members register
It is also a good idea to review the membership list annually. It should be checked whether sponsoring companies have decided to no longer have their pension commitments managed by the IORP or whether new sponsoring companies may have joined in the past year. These changes should be included in a new members list. Based on the IORP Act, a recent membership list must be filed with the registry of the corporate court of the district where the IORP is located. It should also be determined whether the permanent representatives of each sponsoring company are still the same as last year.
5. Management of data
Furthermore, the annual check-up includes a review of data management. In accordance with GDPR legislation, each IORP has established its own data policy, which determines how long the IORP may retain certain data on plan participants (active or deferred) or pensioners. It is therefore important to check whether this deadline is reached in 2023 and start the data destruction in time. It is possible that a follow up with the pension administration is required to check whether data is being stored unnecessarily. Of course, care must be taken because we do not want to destroy data that might be of value in the event of a complaint and subsequent (i.e. legal) proceedings. It is therefore safe to have a data expert check which data can be deleted without major risks.
6. New legislation
At the national Belgian level, draft bills and law proposals, and even at the European level, Regulations and Directives, were published in 2022. So a lot of new legislation will come into force in the coming year. It is therefore a good idea for the IORP to check the following relevant documents for legal compliance:
- Remuneration Policy: was it updated after the 2019 Sustainability Disclosure Regulation?
- Do the Annual Report & Transparency Report contain the necessary disclosures related to the sustainability?
- Internal Reporting Policy or Whistleblowing: was this updated following the draft bill on Whistleblowing?
- Should the Continuity Policy be revised following the Proposed Act for Increasing Digital Operational Resilience (DORA)?
- Are any policies due for three annual review?
7. Conclusion
Following annual check-ups, the IORP is ready for a new year.
Elke Duden - Partner, Antwerp
Nathalie Montoisy - Associate, Antwerp
