An Independent Review Committee (IRC) is a special

committee A committee or commission is a body of one or more persons subordinate to a deliberative assembly. A committee is not itself considered to be a form of assembly. Usually, the assembly sends matters into a committee as a way to explore them more ...

that is required to be part of the governance structure of every

investment fund An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...

that is offered to the public in

Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...

. IRCs are currently unique to the investment fund business in Canada, as other countries have dealt with the inherent

conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations i ...

involved in running public investment funds in different ways. For example, in the

United States of America The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territo ...

, mutual funds have been required to have independent directors ever since 1935. In Canada, a securities regulation called ''National Instrument 81-107 Independent Review Committees for Investment Funds'' (the Instrument) requires every public investment fund to have a fully independent body, called an Independent Review Committee, whose role is to oversee all decisions involving an actual or perceived

faced by the fund manager in the operation of the fund. The Instrument sets out an independent oversight regime for all publicly offered investment funds that is intended to improve investment fund governance in Canada. The

International Organization of Securities Commissions The International Organization of Securities Commissions (IOSCO) is an association of organizations that regulate the world's securities and futures markets. Members are typically primary securities and/or futures regulators in a national jurisdic ...

defines investment fund governance as a framework for the organization and operation of investment funds that seeks to ensure that funds are organized and operated in the interests of fund investors, and not in the interests of fund insiders. Improving fund governance has been a priority for 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. In 1999, the Canadian Securities Administrators retained Stephen Erlichman to provide a summary of the discussion on governance in Canada and abroad and to make specific recommendations to improve fund governance. His report, entitled "Making it Mutual: Aligning the Interests of Investors and Managers: Recommendations for a Mutual Fund Governance Regime in Canada," was released in June 2000. On March 1, 2002, the CSA released Concept Proposal 81-402 ("Striking a New Balance: A Framework for Regulating Mutual Funds and their Managers"), setting out the CSA's vision for a renewed framework for regulating

mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...

s and

fund managers Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institut ...

based on five pillars: registration of mutual fund managers (now NI 31-103), mutual fund governance, product regulation, disclosure and investor rights and regulatory presence. After public consultation, the CSA published the Instrument in final form on July 28, 2006 and it came into force in 2007. The manager must abide by the decision of the IRC on those matters that require its approval (subject to a manager's overriding right to seek "exemptive relief" from its regulator). A manager must consider the recommendation of the IRC in respect of other conflict of interest matters, but may disregard the recommendation of the IRC, after such consideration In March 2007, the CSA published an FAQ on the Instrument entitled "CSA Staff Notice FAQs on 81-107: NI - 81-107 - Independent Review Committee for Investment Funds".

References

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External links

The Instrument itself (consolidated)
Law of Canada