New corporate governance code for the funds industry to be formulated
Fund directors' code of governance to be developed by funds industry representative body with direction and guidance from the Financial Regulator. Clearer details emerge as to elements the Financial Regulator will require the code to cover.

As part of a range of regulatory initiatives, the Financial Regulator has recently proposed the introduction of a corporate governance code for Irish funds. This will cover corporate governance practices of boards of investment funds and fund management companies as well as fund service providers such as administrators and custodians. This follows similar corporate governance initiatives in the area of banking and insurance.

Recognising the importance of industry consultation in this process, the Financial Regulator
has invited the Irish funds industry representative body (the Irish Funds Industry Association - "IFIA") to prepare the code.

Speaking at the IFIA Global Funds Conference at the new Aviva Stadium on 9 June 2010*, Matthew Elderfield, Head of the Financial Regulator, took the opportunity to give the IFIA some direction on elements that the Financial Regulator consider the code should address. These items will be of particular interest to many observers keen to gauge what form the code may take.

Below is a summary of the items mentioned by Mr. Elderfield that the Financial Regulator expects to be considered by the IFIA when formulating the code:

  • the possibility of imposing a restriction on the number of non-executive directorships to be held by any one director, taking into account the nature, scale nd complexity of the funds concerned and whether the director is a full time director and/or other commitments of the director;
  • consideration of a process to address potential conflicts of interest between a directorship of a fund and other directorships held by the director;
  • due diligence procedures for vetting and selection of directors by promoters;
  • board meeting attendance requirements and possible disclosure of attendance records in the annual accounts;
  • whether there should be a minimum number of independent non-executive directors on each board; and
  • whether boards should include directors with asset management expertise.


The IFIA's legal and regulatory committee will be developing the code with the input of the
Financial Regulator. What is clear, from the very pointed direction outlined above, is that the Financial Regulator envisages playing a substantive role in the process. This was urther stressed by Mr. Elderfield when he spoke of his colleagues sitting in on the IFIA's deliberations to "give a clear steer" on what the Financial Regulator considers the code should cover.

Given that, as at 31 May 2010, there are almost 1,000 funds authorised by the Financial Regulator, not to mention the authorised management, administration and trustee companies, a huge amount of boards will be impacted by the code. How significant the impact will be is yet to be seen.

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