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IRC Knowledgebase

The Regulators' Perception:

"The national public interest and the interest of investors are adversely affected when investment companies [funds] are organized, operated and managed, or their portfolio securites are selected, in the interest of [others], rather than in the interest of all classes of such companies' security holders."

The Investment Company Act 1940 (US)

The International Organization of Securities Commissions (IOSCO) recently defined investment fund governance to be a framework for the organization and operation of investment funds that seeks to ensure that investment funds are organized and operated in the interests of fund investors, and not in the interests of fund insiders.

"In compliance with the governance principles recently articulated by IOSCO, [NI 81-107] provides for the independent review and oversight of the conflicts faced by the fund manager in the operation of the investment fund....The CSA believe managers of all investment funds, large and small, face conflicts of interest and will benefit from the independent perspective brought to bear by an independent body on such matters."

Improving fund governance has been a priority for the Canadian securities regulators for several years. The process began in the 1990s with a debate over the need for independent boards for mutual funds and increased regulatory standards for fund managers.

National Instrument 81-107 now imposes a minimum, consistent standard of independent oversight for all publicly offered investment funds in each of the jurisdictions represented by the Canadian Securities Administrators (the CSA). The new rules embody the emerging international standards on fund governance but the CSA has tailored these to the specific structures of the Canadian investment fund industry and the Independent Review Committee model is unique to Canada.

Core Document Database:

  • Click here to see NI 81-107 (published July 2006).
  • Click here to see the cost benefit analysis on the introduction of IRCs for Mutual Funds, as prepared by the OSC.
  • Click here to see the FAQ on NI 81-107 issued by the CSA in March 2007.

To download a complimentary copy of our industry leading White Paper entitled "National Instrument 81-107: An Introduction to Independent Review Committees", click here.

To download an article written by W. William Woods, President & CEO of IRI, entitled "Building an Effective Governance Program for Hedge Funds", click here. The article is excerpted from "Starting a Hedge Fund – a Canadian Perspective", published by ISI Publications (click here to buy that book).

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