New Friendly Societies bill passed in Parliament
THE FRIENDLY Societies Act of 1843, described as “likely to be archaic” by Finance Minister Camillo Gonsalves, has been replaced by the St. Vincent and the Grenadines Friendly Societies Act 2021.
The Act was introduced at the July 6 sitting of the House of Assembly and Minister Gonsalves noted that the architect and primary driver of this piece of legislation was Sir Louis Straker.
He said Sir Louis, now retired from active politics, made it a priority to deliver the Consumer Protection Bill and the St. Vincent and the Grenadines Friendly Societies Bill 2021.
“So the legislation that governs friendly societies is 178 years old…it goes without saying that that particular piece of legislation is archaic.
“By definition an 1843 Act is likely to be archaic and does not adequately aid in the supervision of these entities in view of the absence of substantive provisions, detailed regulatory requirements or any form of sanction or penalty,” the Finance Minister outlined.
“And as money is watched ever more closely by local, regional and international entities, the large deposits held by some Friendly Societies increasingly became a target of query by other financial institutions and regulators.”
Gonsalves noted that in 2016, the Financial Services Authority (FSA), commenced a comprehensive assessment of the various business models used by the societies in conjunction with the provision of guidelines and the overall long term viability of the sector.
He said also that prior to this, the FSA sought to identify the Friendly Societies operating in St. Vincent and the Grenadines (SVG) and have them registered. They also conducted familiarisation visits to apprise these entities of the work of the FSA and to obtain information about their operations.
Gonsalves said that the new legislation, which affects the 18 registered Friendly Societies, ensures that the opportunities for exploitation of these societies and their members are minimised and appropriate sanctions exist whenever breaches of the law may occur.
“The bill is aimed at modernising the way business is done by friendly societies, taking into consideration the requirements of the Financial Action Task Force (FATF), and the Organisation for Economic Co-operation and Development (OECD) as well as various international best practices.
Gonsalves said the Bill also includes and expands upon the previously issued friendly society guidelines.
“The main objective in addition to this, minimising breaches of the law, modernising, streamlining, bringing into compliance with international best practices, the objective is to strengthen the regulatory powers of the FSA in relation to the friendly societies,” Gonsalves said.
He noted that as such the Bill makes significant changes to the 1843 Act and outlines requirement for registration, reporting requirements and enforcement of the investigative powers of the FSA.
Friendly societies will now have to register with the FSA and they will be issued a certificate of registration. They are also now obligated to maintain appropriate records and make the records available for inspection by the FSA.
There are also now mandatory requirements for the preparation and filing of financial statements and audit reports.
Gonsalves however noted that some of the larger societies have been doing this while some of the smaller ones are managing their affairs in a less structured manner.
“There are rules now regarding the investment of funds and the holding of real estate…there is now the need for friendly
societies to establish or set aside a reserve fund as required by all the other financial institutions that operate locally.
Another new requirement is that officers employed by friendly societies must now account for the funds of the society and must sign a bond.
“Those of us who have heard enough stories from our constituents may all have a story about so and so who faithfully took their book to a friendly society only to hear that somebody absconded with the money, or that the money wasn’t there for them at the end of the process. Again, casting no aspersions on the larger and more successful and more established societies that I mentioned as registered societies,” Gonsalves commented.
The Minister of Finance said also that the Bill sets out provisions which deal with the manner in which monies are disbursed when a member dies, as during the drafting of the Bill, there were some interesting discussions.
“For example, there are situations where sometimes this granny bringing the book for a child and there is a parent who is not involved in any way in that process, but on the death of a child, what does one do and how does one deal with the person who has been paying in and the person who is the beneficiary…the Bill deals with these matters,” Gonsalves explained.
It was also noted that in areas of management and administration, the 1843 Act did not address the issue of management and administration. The new Bill also talks about directors, the tenure of directors and the duty of care to be exercised by directors.
“This Act empowers the registrar to suspend, cancel or liquidate friendly societies, remove officers, conduct on-site examinations, and the issue of dissolving friendly societies. The issue of dissolution of friendly societies which was not dealt with in the 1843 Act but has been specifically addressed in this particular piece of legislation,” the Finance Minister said.
He added that these membership based financial institutions are a critical component of the domestic financial system.
The St. Vincent and the Grenadines Friendly Societies Bill 2021 was supported by the opposition members in the House.
Fitzgerald Bramble, the Parliamentary Representative for East Kingstown, speaking in support of the measure stressed that friendly societies are embedded in the society, especially in some of the smaller villages.
Bramble said he has an affinity for friendly societies as money from one helped to put him through school.
“I just also want to emphasise the history of exploitation as the honourable Minister of Finance kind of alluded to, the history of exploitation of members of some of these friendly societies and I am happy that this Bill seeks to address regulation which would prevent or reduce the incidents of this reality, of these things happening,” Bramble said.
He said he hopes there is a balance between regulating and over-regulating, “to the point where we regulate out some of the smaller societies and even discourage the start-up of future societies.”
He therefore called for technical assistance for the smaller societies and noted that he agrees that the financial sector here needs to be up to par.