ICI Responds to IOSCO Fund Governance Report

Washington, DC, May 19, 2005 - A report issued by IOSCO, regarding fund governance seeks to ensure that collective investment schemes (CIS), like mutual funds, are operated efficiently and in the investors' interests. The Institute supports IOSCO's goal of protecting investors, and urges the organization to consider the ability of fund affiliates (trustees and depositaries affiliated with a fund) to provide independent oversight of the fund operator.

Background
In the report, IOSCO states that a common objective for regulators should be to develop a governance framework that "seeks to ensure that CIS are organized and operated efficiently and exclusively in the interests of CIS investors, and not in the interest of CIS insiders." As a means to accomplish this objective, IOSCO sets forth the principle of requiring independent review of those who operate collective investment schemes.

ICI Position
The Institute's comment letter strongly supports IOSCO's goals but questions whether IOSCO should consider affiliates of a fund operator (trustees and depositaries affiliated with the fund operator) to be independent for these purposes. In the letter, the Institute states that, as a member of the same corporate group as the fund operator, an affiliated depository or trustee has an economic interest in the success of the corporate enterprise that could impair its ability to provide independent oversight of the fund operator.

ICI agrees with IOSCO that it is appropriate for each jurisdiction to determine the standards that will apply to funds sold to the jurisdiction's investors. Accordingly, the Institute does not express an opinion whether, or under what conditions, a system that relies upon affiliates to oversee fund operators achieves regulators' objectives of protecting fund investors.

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