Changes affecting directors of Irish funds
The Financial Regulator issued two letters to the Irish Funds Industry Association (the "IFIA") on 13 and 14 September 2010 which relate to the appointment of directors to fund boards. The first letter advises of a new procedure for the approval of the appointment to fund boards of individuals who hold more that 30 directorships. The second letter sets out the Regulator's policy on the developing practice whereby directors are appointed to investment funds via "conduit" firms.
The Financial Regulator has charged the IFIA, in consultation with it, to develop a voluntary corporate governance code applicable to authorised investment funds (the "Code") by the end of the year. The letters indicate that the Financial Regulator's attention is firmly focused on corporate governance requirements that are to apply to the funds industry. The Financial Regulator has indicated that the Code should, among other things, address issues such as conflicts of interest and the independence of directors and should include recommendations regarding the maximum number of directorships to be held by individuals acting as directors in the funds sector.
New procedures for the approval of certain directors
Pending the finalisation of the Code, the Financial Regulator now requires individuals who hold more than 30 directorships (which include all Irish regulated and unregulated companies and all-non-Irish companies) to bring certain key issues to the attention of the board of any fund proposing them as a director. The board must be informed that:
the Financial Regulator is concerned about the high number of directorships held by some individuals;
the Financial Regulator has requested that the funds industry develop the Code;
the Code must include recommendations regarding the optimal number of directorships for individuals;
when the Code is adopted, individual boards may need to be restructured to take account of any recommendations.
The possible inclusion in the Code of a maximum limit on the number of directorships is likely to cause difficulty for...