Independent Review Committees (IRCs)

NI 81-107 requires every public mutual fund to have an Independent Review Committee (IRC) consisting of at least three individuals, all of whom must be independent. For existing funds, the committee must be established before the first anniversary of the coming into force of the Instrument and, thereafter, new funds must establish an IRC before they accept any purchase orders.

The Instrument does not mandate a specific legal structure for the IRC, provided a manager complies with the minimum requirements set out in the Instrument when creating the committee. A fund manager may use any of the following as the IRC for its mutual fund:

• individuals appointed as trustees for the mutual fund;
• the board of directors, or a special committee of the board of directors, of a registered trust company that acts as trustee for the mutual fund; or
• a committee of individuals, each of whom is independent from the manager.

One committee can act as the IRC for all the mutual funds that are managed by the same fund manager and the Instrument suggests that different managers can share the same IRC for each of the mutual funds managed by those managers.

Many commentators in the industry have pointed out that there is a very limited pool of people who are both suitably qualified and willing to take on the role of an IRC member (particularly in view of the potential legal liabilities that might attach to such a role) and that such committees may impose a significant cost burden on the industry.

However, a fund client can outsource its independent review committee obligation to Independent Review Inc. We will help set up and then run the committee for the Fund (thus saving the Fund the time and expense of constituting its own IRC and having to find and appoint appropriate, independent persons).