News Releases

Securities Regulators Propose Mutual Fund Governance Regime

Jan 09, 2004

Canada’s securities regulators published a proposed rule today that would require investment funds to establish fund governance structures that focus on managing and resolving conflicts of interest in mutual funds.  The Canadian Securities Administrators (CSA) has requested public comment on proposed National Instrument 81-107 Independent Review Committee for Mutual Funds, by April 9, 2004.


The proposed rule builds on concepts introduced March 1, 2002 by the CSA in the Concept Proposal 81-402 Striking a New Balance: A Framework for Regulating Mutual Funds and their Managers and brings regulators one step closer towards implementing a mandatory fund governance regime for all publicly offered mutual funds in Canada.


Under the proposed rule, each mutual fund manager is required to establish an independent review committee (IRC) for its funds. The IRC is charged with reviewing all matters involving a conflict of interest between the fund manager’s own commercial or business interests and its fiduciary duty to manage its mutual funds in the best interests of those funds. These conflicts include transactions with entities that are related to the manager, trades between mutual funds, certain changes which currently require an investor vote, as well as situations when a person would question whether the manager is in a conflict of interest.


The current proposal to introduce fund governance is more focussed than what the CSA described in the concept proposal, largely because of the public comments the CSA received. “Our proposal is about implementing a governance regime that will help mutual funds resolve conflicts of interest and manage the funds in their care with the interests of the fund holders front and centre,” said Stephen Sibold, Chair of the CSA and Chair of the Alberta Securities Commission.


“The proposed rule will require independent review specifically in the area where people responding to the concept proposal agreed it mattered most, without placing an undue burden on mutual fund managers who may have limited experience working with an independent board,” added Sibold. “This framework is a good starting point, and we may very well be able to build on this initial structure in the future,” added Sibold.




Media relations contacts:


Joni Delaurier

Alberta Securities Commission


Eric Pelletier

Ontario Securities Commission