The Handbook of Board Governance, 3rd Edition

10A Critique of the Investment Fund Governance Regime in Canada

André Fok Kam, BSc, MBA, FCA¹

Member of the Independent Review Committee, SunLife Mutual Funds

EXECUTIVE SUMMARY

Since 2006, publicly offered investment funds in Canada have been required to have an independent review committee charged with the oversight of conflicts of interest. A conflict of interest is a situation where a reasonable person would consider a fund manager or related party to have an interest that may conflict with its ability to act in good faith and in the best interests of the fund, as required by securities law.

There is little doubt that the introduction of independent review committees has served to enhance fund managers’ awareness of their fiduciary obligation toward investors. In the course of its interactions with the committee, a fund manager cannot but sense that it is subject to independent oversight and will conduct itself accordingly. This is governance in action.

Independent review committees do have certain limitations, in particular their dependence on the fund manager to provide valid information. However, such limitations are common to all boards and committees.

The fund governance regime in Canada is fundamentally robust. It has weathered the test of time and continues to evolve through securities regulators’ willingness to expand the role of independent review committees as new issues arise.

Introduction

In 2006, the Canadian Securities Administrators (CSA)² released ...