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Medical Scheme – News Flash

The South Gauteng High Court granted an interim order placing Sizwe Medical Fund under provisional curatorship after an application made yesterday by the Council for Medical Aid Schemes (CMS) for alleged governance failing. This provisional order was granted despite the scheme being solvent (well over the prescribed 25% solvency ratio) and having a large beneficiary pool. The court appointed a provisional curator authorising him to suspend the board, convene a special general meeting of members to appoint new trustees and manage the scheme for a year while the allegations are being investigated. The scheme’s board allegedly failed to act after allegations of fraud committed during December 2010 had been tabled to them in January 2011. MSA obliges a scheme to have 10 trustees on its board, however the scheme allegedly only had six board members. CMS’s head of compliance alleged the scheme had a "whole host" of financial irregularities and its principal officer allegedly has an interest in a brokerage that does business with the scheme. In its affidavit CMS alleges the schemes’ principal officer had been appointed despite not possessing the required qualifications and experience to accept responsibility for, among other, the management of an income of R2bn a year and reserves of more than R450m, to act as the head, face and hands of a medical scheme that has the health of more than 150 000 persons at stake, and grant it strategic leadership. Boards need to be aware of their responsibilities and ensure that compliance with the MSA, the schemes’ rules and their fiduciary duties, which are of paramount importance regardless of whether such actions have been legitimately delegated to a principal officer, as they are ultimately responsible for executing their duties. Boards need to be vigilant against empowering service providers or the principal officer in a manner that could ultimately result in the board being prejudiced and the members being out of pocket. If you have any questions in this regard, please contact: Michelle David tel 011 775 6333