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 or other form of organization. A committee may not itself be considered to be a form of assembly or a decision-making body. Usually, an assembly o ...

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

investment fund An investment fund is a way of investment, 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 ad ...

that is offered to the public in

Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...

. 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 wikt:interest#Noun, interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates t ...

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

United States of America The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 states and a federal capital district, Washington, D.C. The 48 contiguo ...

, mutual funds have been required to have

independent director An independent director (also sometimes known as an outside director) is a member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. In the United States, indepe ...

s 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.

History

In 1999, a debate over the need for independent boards for mutual funds and increased regulatory standards for fund managers caused the

Canadian Securities Administrators The Canadian Securities Administrators (CSA; , ACVM) is an umbrella organization of Canada's provincial and territorial securities regulators whose objective is to improve, coordinate, and harmonize regulation of the Canadian capital markets. ...

to suggest Stephen Erlichman make specific improvement recommendations. 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"), a framework for regulating

mutual fund A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...

s and fund managers 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

{{Reflist

External links

The Instrument (consolidated)
Law of Canada Investment funds Canadian law journals Regulation