SERA WESTERN CAPE Policy Manual: Management Manual Doc nr: MP 001 / 1 Title: Procedure on Impartiality, integrity and objectivity Version nr: 05 Copy no: 01 Page 5 Date: 23/02/2012 Procedure on Impartiality, integrity and objectivity 1. Scope and Purpose The purpose of this document is to provide a framework to ensure that verifications are conducted with impartiality, integrity and objectivity. 2. Definitions and References: - Clauses 13.2, 13.6.6 and 14.6 of R 47-02 3. Procedure: 4. Principles: Independence of mind requires the provision of an opinion without being affected by influences that compromise a professional judgement during the verification process, allowing verification analyst to act with integrity, and to exercise objectivity and professional scepticism. Independency in appearance however also require from SERA Western Cape to avoid facts and circumstances that are so significant that a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, would reasonably conclude that SERA s integrity, objectivity or professional scepticism had been compromised. SERA Western Cape insists on the highest standards of professional behaviour by its employees, management and equity holders. The Management of SERA Western Cape is committed to ensuring impartial and independent verifications/ratings which have been conducted with integrity. SERA Western Cape shall not engage in any verification activities of measured entities in which SERA Western Cape and / or its shareholders and / or its directors hold an equity share or are the holder of voting rights. The primary responsibility for safeguarding the impartiality, integrity and objectivity of the verification processes of SERA Western Cape will be with the Management of SERA Western Cape (i.e. Directors and appointed Managers). - To this end, Management will specifically: - Compiled by VM Approved SJ Neethling
MP 001 / 1(5) Page 2 of 6 Identify threats to independence Evaluate whether identified threats are clearly insignificant, and In cases where the threats are not clearly insignificant, identify and apply appropriate safeguards to eliminate or reduce threats to an acceptable level. Where identified threats to independence are not clearly insignificant, and it is decided to accept or continue such an engagement, this decision will be documented, as well as a description of the threats that have been identified and the safeguards that are to be implemented to eliminate or reduce the threats to an acceptable level. Make a publicly available declaration that they will perform their roles and responsibilities with adherence to the highest standards of integrity, impartiality and objectivity. SERA Western Cape will be held jointly and vicariously liable for any material contraventions of the impartiality, integrity and independence of its management, verification analysts, employees and external contractors. SERA Western Cape undertake that no employee will validate and verify an Measured Entity, if he/she provided any form of consulting to the Measured Entity two years prior to the verification. SERA Western Cape shall not provide any other services, which could compromise confidentiality, objectivity or impartiality. Should a situation arise that could compromise the above, the Verification Manager and/or Directors will be informed, who will in turn investigate the matter. Should it be found that the activity could compromise the above, the service will be withdrawn with immediate effect. SERA Western Cape and its management will take all possible steps to ensure that its verification process will be and appear to be free of any influence, interest or relationship, whether direct or indirect, which might be regarded, whatever its actual effect, as being incompatible with integrity, objectivity and independence. In support of above mentioned all Verification Analysts and Verification Managers involved in the verification process will sign a Declaration of Impartiality on each Measured Entity s verification which they are involved in. The management of SERA Western Cape will meet on a yearly basis to consider and address potential threats to impartiality. The management of SERA Western Cape will consider implementing general safeguards. SERA Western Cape and / or its shareholders and / or its directors shall not be a party to any debt creating agreement between it and themselves if such an agreement encumbers or is perceived to encumber SERA Western Cape in the execution of its professional discretion and objectivity towards the BEE assessment of that entity.
MP 001 / 1(5) Page 3 of 6 SERA Western Cape shall take measures to prevent a consultancy agency from implying that BEE verification would be simpler, faster or less expensive if SERA Western Cape is used. Should it come to the attention to SERA Western Cape that such a statement or claim was made by a consultancy agency to a client in this regard; the verification/contract with regard to the specific client will be cancelled with immediate effect. The Consultancy Agency will be required to investigate the matter and draw a Findings Report, indicating the Route Cause, Corrective Actions and Preventative Actions. All new referrals will be suspended until the Findings Report has been approved by the Directors of SERA Western Cape. 5. General safeguards to be considered by the Management of SERA Western Cape to ensure the objectivity of its verification processes: - Continuous reinforcement of the importance of independence and the expectation that Verification Analysts / Teams will act in public interest; - Procedures of SERA Western Cape to implement and monitor quality control of verification procedures; - Procedures by SERA Western Cape to monitor compliance with policies and procedures as they relate to independence and verification processes; - Procedure to enable SERA Western Cape to identify interests and relationships between SERA Western Cape and measured entities; - Designation of Verification Managers as responsible for overseeing the adequate functioning of the safeguarding systems; - A disciplinary mechanism to promote compliance with policies and procedures; - Procedures to verification analysts and other staff to communicate to senior levels any issue of independence and objectivity that concerns them; - Timely communication of SERA s policies and procedures, and any changes thereto, to all professional staff, including appropriate training and education thereon. - Policies and procedures to monitor and, if necessary, manage the reliance on revenues received from intermediaries - All staff members will be required to commit themselves to a Code of Conduct (MF 001 / 2: Code of Conduct). Potential threats to the impartiality, integrity and objectivity of SERA Western Cape that have been considered by the Management include:
MP 001 / 1(5) Page 4 of 6 Financial interests (direct financial interests or material indirect financial interests). 6. The following potential areas of conflict interests in this category have been identified: a) Financial interests held by (a) verification analyst(s) in a measured entity or a third party related to a verification analyst who may have an interest in the outcome of a verification/rating process. Verification analysts will be required to give written declaration of any financial interest in a measured entity to which they are to be assigned or in a third party which may have interest in the verification /rating process to which they have been assigned Removing a verification analyst from the verification team, when that individual s financial interests or relationships create a threat to independence. b) Dependence on fees from intermediary parties. It is envisaged that SERA Western Cape may be recommended to potential clients as a preferred service provider by corporate clients (in respect of to their supplier corps) and / or BEE consultancy agencies: Policies and procedures by SERA Western Cape to monitor compliance with policies and procedures as they relate to the independence of verifications; Policies and procedures to monitor and, if necessary, manage the reliance on revenue received from intermediaries; Using different verification manager and verification teams with separate reporting lines for the provision of services to measured entities Detailing the fee structure, payment policy, communication lines and all other aspects of the relationship between SERA Western Cape and intermediates in written legal agreements. c) Concerns about the possibility of losing a client: Policies and procedures by SERA Western Cape to monitor compliance with policies and procedures as they relate to independence of verification processes;
MP 001 / 1(5) Page 5 of 6 Policies and procedures to monitor and, if necessary, manage the reliance on revenue received from intermediaries. d) Familiarity threats, i.e. when, by virtue of a close friendship with a measured entity, its directors or employees, SERA Western Cape or any of its Verification Analysts becomes too sympathetic to the measured entity s interests, including a close family relationship between a Verification Analyst and an employee in a decision making capacity in a measured entity: Verification analysts will be required to declare his / her interest in assigned entities (MF 001 / 1: Declaration of impartiality) Verification Managers will consider any declared interests and if expedient, remove the verification analyst from the allocated verification process Employees and sub contractors of SERA Western Cape will be required to sign the Code of Conduct and confidentiality agreements which will make provision for impartial, objective and accountable conduct.