UK – New proposals on the governance of collective investment schemes – put together in the wake of the US market timing scandal - have been modelled on some elements of the existing pension disclosure code.
The Investment Management Association has issued a 55-page consultation paper reviewing the governance arrangements of the schemes.
The paper, drawn up by a working party led by IMA chairman Lindsay Tomlinson of Barclays Global Investors, set out to consider whether the existing structures for overseeing managers and protecting the interests of investors are still fit for purpose.
In the areas such as cost disclosure and the oversight of investment management activities, the proposals take account of the IMA’s 2002 voluntary Pension Fund Disclosure Code.
On costs disclosure the report states that it would be “logical” for PFDC principles to be extended to collective schemes “to ensure that the economic interests of their investors are protected”.
“IMA members have commented that as this information has been found to be valuable to pension fund trustees, it would seem logical that similar disclosure is extended to CIS.”
The proposals call for managers to produce and supply to depositaries annual reports similar to so-called PFDC level one disclosure – which related to an investment manager’s policies, procedures and control processes.
And the depositary oversight role should also be extended to cover level one disclosure – to “ensure that the manager has adequate procedures and controls in place”.
“We believe that implementation of these recommendations, including the extension of the depositary’s oversight of the manager’s activities and the management of conflicts of interest, will further enhance investor protection in the changing structure of the UK CIS industry,” said Tim Gandy, chairman of the Depositary and Trustee Association.