Auction Industry Code Presentation - Auctioneering€¦ · control is counter-productive” Tirhani...

Setting Auctioneering Standardswww.auctioneering.co.za

Auction Industry Code Presentation

Setting Auctioneering Standards

Why Regulation?

Policymakers may opt for government regulation of privacy when they feel that “something needs to be done;”

however, the risk of overregulation is potentially greater than the risk of

under-regulation.Anonymous

“Left to their own devices, human

beings tend to self-destruct. Too much control is counter-productive”

Tirhani Mabunda

Example: 2008 US (Global) Financial Crisis


Markets offer a spectrum of optionsranging from unregulated, self-regulation, co-regulation togovernment regulation

Self-regulation involves privateassociations governing their actionsthrough voluntary agreements andpeer pressure.

Self-regulation addresses a range ofissues, from establishing industrystandards, to developing andapplying codes of professionalethics, to ensuring consumerprotection.

Some background on regulation


Self-regulated associations use self-policing activities to enforcestandards among peers.

The challenge of self-regulation isthat bad practitioners who are non-compliant opt to stay outside thesystem.

Co-regulation occurs when industryand government jointly administerthe regulatory process.

State regulation involvesgovernment entities regulating theactions of firms in the privatesector.



State regulation is often rigid,prohibitive, costly, disruptive andundesirable

The absence of regulation and rulesdoes not mean that companiesautomatically engage in badbehaviour.

Many other controls exist, includingsocial norms, civil litigation, andmarket forces such as fear ofreputational harm, and they helpmoderate firm behaviour.

However, greed often drivescompanies to disregard ethicalconduct



Therefore, regulation (be it self orgovernment regulation decreasesrisks to consumers, increases publictrust, and combat negative publicperceptions



South Africa’s auction industry is alaissez-faire environment with limitedstate regulation, non-existentmonitoring and poor enforcement.

Auctioneers are only partialregulated through: the Estate Agency Affairs Act, No. 112 of

1976 for immovable property regulated bythe Estate Agency Affairs Board (EAAB).Muted repeal through the PropertyPractitioners Bill;

the Agricultural Produce Agency Act, No. 12 of1992 for livestock auctioneers monitored by theAgricultural Produce Agents Council (APAC).Repeal through the property Practitioners BillGazetted for public comment on 28 March 2013

Landscape of the South African auction industry


the Sheriffs Act, No. 90 of 1986 for sale inexecution regulated by the Sheriffs Board;and

The Second Hands Goods Act, No. of2008

Section 45 and regulations 18-33 of theConsumer Protection Act No. 68 of 2008provide partial regulation for the conduct ofauctions

Objectives of the Estate AgencyAffairs Act are: To provide for the establishment of an Estate

Agency Affairs Board, To provide for the establishment of an Estate

Agents Fidelity Fund, and To provide for the control of certain activities of

estate agents in the public interest, and forincidental matters.



Not much is known about theobjectives of the PropertyPractitioners Bill:

Objectives of the AgriculturalProduce Agency Act: To provide for the establishment of an

Agricultural Produce Agents Council, To provide for the establishment of the

Fresh Produce Fidelity Fund, and To provide for the control of certain

activities of agricultural produce agents;and for matters connected therewith.



Purpose of the Agricultural ProduceMarketing Agencies Bill 2013: To provide for the continued existence and

name change of the Agricultural ProduceAgents Council to Agricultural ProduceMarketing Agency,

To provide for the continued existence andname change of the Fresh Produce FidelityFund to Agricultural Produce MarketingAgency Fidelity Fund,

To provide for the constitution of the Boardof the Agricultural Produce MarketingAgency,

To provide for broader objects andfunctions of the Agricultural ProduceMarketing Agency,



To make certain provisions applicable to allor certain categories of agricultural produceagents, auctioneers, brokers andwholesalers,

To provide for the regulation of theoccupations of auctioneers, brokers andwholesalers,

To provide for the regulation of freshproduce markets,

Provide for compulsory training, registrationand accreditation of all agricultural produceagents, auctioneers, brokers, wholesalers,sales persons and booking clerks,

To repeal the Agricultural Produce AgencyAct, No. 12 of 1992, and

To provide for matters connected therewith



Objectives of the Sheriffs Act are: To provide for the appointment of Sheriffs, To provide for the establishment of the South

African Board of Sheriffs, To provide for the establishment of a Fidelity

Fund for Sheriffs, and To provide for the regulation of the conduct of

Sheriffs, and matters connected therewith.

Objectives of the Second HandGoods Act are: To regulate the business of pawnbrokers, scrap

metal dealers, general dealers in second handgoods and recyclers,

To combat trade in stolen goods, and To promote ethical standards in the second

hand goods trade



None of the legislation aboveregulate the entire auction industryand general conduct of auctions.

Problems due to lack of regulation: Lack of professionalism and credibility as

anyone can become an auctioneer withoutthe necessary qualifications, experience orintegrity

No enforceable code of goodconduct/practice

No enforceable code of ethical standards No accountability as the lack of licensure

means that practicing auctioneers have noreporting requirements for record keepingand trust funds

Challenges due to lack of regulation


Vulnerability for consumers, both sellers andbuyers who often entrust their assets and fundsto unqualified, unprofessional and sometimesunethical auctioneers

Corruption, not only within theauction industry, but across thebroader asset management and assetdisposal value chain.

Lack of confidence in the auctionindustry resulting in: Damage of image and erosion of confidence in

an already less credible auction industry viewedwith skepticism by members of the generalpublic.

Mistrust by creditors who respond by withholdingreserve values, hence the emergence of subjectto confirmation (STC) auctions.

Challenges due to lack of regulation


The question is: “What is theefficacy of SAIA’s self-regulationunder these circumstances”?

The level of industry participation inthe regulatory process may vary,from industry being completely shutout of the process by government toindustry being the leading actor insetting policy.

We are lucky to be championing ourown regulatory framework.

However, we must not be obliviousto the fact that a lot is happening onthe periphery.

SAIA’s role


Auctions play a critical role insociety and the economy,particularly the immediate (quickturnaround) liquidation of assetswhich saves sellers time, holdingcosts and the deterioration ofassets, with many benefits.

History will judge the current crop ofauctioneers harshly for allowing thedemise of the auction industryunder their watch.

The time is now to take action byintroducing accountable businesspractices within the auctionindustry.

SAIA’s role


Professionalization of the auctionindustry through a licensing regime thatwill foster increased confidence in theauction industry by ensuring that: Only ‘fit and proper’, honest and

competent individuals/companies practiceas auctioneers.

Minimum entry requirements includingqualifications, experience and ethicalstandards are prescribed for auctioneers.Fortunately, the South AfricanQualifications Authority (SAQA) hasregistered NQF4 and NQF5 qualificationsfor auctioneers.

Occupational requirements are introducedto assess and exclude incompetent anddishonest practitioners.

Solutions


Once admitted into the auctioneeringprofession, auctioneers keep abreast ofrecent developments through regular re-examination and continuous professionaldevelopment.

The overall objective of SAIA’s

initiative is to create a credibleauction industry that will: Increase consumer confidence in the

auction industry Protect consumers, both sellers and buyers

against unfair and anti-competitive conductat auctions

Adherence to good practice

Solutions continued ….


Chapters 5 and 6 are problematic. Inparticular, the Estate Agency Affairs Actcannot be automatically extender to coverthe auction industry.

Inclusion could be possible if the auctionindustry is included in the proposedTransaction Bill.

Another possibility is for the auctionindustry to be placed under the auspices ofthe Justice Department.

Solutions continued ….


Lobby for the separate legislation ofthe auction industry

Establish an auction industry codein terms of Section 82 of theConsumer Protection Act [with orwithout ADR]:

Plug onto the Property PractitionersBill

Plug onto the Agricultural ProduceMarketing Agencies Bill 2013

Plug onto the Sheriffs Act

Options


Whichever path we take, solidfoundation has already been built: Comments by Adv Werner Krul to

the effect that the draft AuctionIndustry Code is a laudable attemptfor self-regulation of the entireauction industry in South Africa.

Draft correctly aligned with CPA However, there are challenges

including:• Auction industry currently doesn’t exist

as a homogenous industry.• Bringing all categories of auctioneers on

board.

Options

Setting Auctioneering Standardswww.auctioneering.co.za

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