The Swiss federal pensions regulator “exceeded its legal authority” when it proposed requirements that related to the admission of external auditors of occupational pension funds, according to the country’s government.
Although the Oberaufsichtskommission (OAK BV) was allowed to issue certain technical instructions to pension fund auditors as part of its statutory mandate, the introduction of a special permit for examining pension funds was a matter for lawmakers, the federal council said in a report published today.
However, it was in agreement with the OAK that there were issues that need to be addressed with regard to the auditing of occupational pension funds, as previously outlined by the regulator.
The cabinet had therefore instructed the federal department for internal affairs to weigh possible legislative steps, including whether the federal audit supervisory authority should be assigned sole responsibility for admitting and supervising auditors of occupational pension funds.
In 2015 OAK carried out a comprehensive survey of the quality of external audit reports and found a high error rate. It subsequently issued a draft directive laying down requirements for auditors, which the cabinet noted was strongly criticised by associations and authorities.
The government was subsequently commissioned to check whether OAK’s directive was in line with its legal authority and to potentially consider adjustments. Today’s report is the outcome of that review process.
It reaching its conclusions the government also had the input of an opinion from an independent expert, Thomas Gächter of the University of Zurich, although it effectively disagreed with his view that OAK should be denied any authority to give instructions to auditors.
If the supervisor were only permitted to issue recommendations, it would ultimately not be able to fulfil its task of making sure that the occupational pension system as a whole was functioning reliably, according to the government.
However, the statutory authority to issue directives only applied to those that were needed for quality assurance, it noted in its report. It did not extend to issuing stipulations relating to the admission of auditors, which was the responsibility of the federal audit supervisor.
The audit authority has previously warned about weaknesses in the auditing of the country’s pension funds.