Fund directors must bow out to protect investors, says new code of conduct
DIRECTORS who sit on the boards of investment funds should be prepared to resign if that is in the interests of the fund's investors, according to a new code issued today.
The code from the Corporate Governance Association of Ireland is aimed at those who want high standards of corporate governance in the Irish funds industry. It contains a number of radical measures aimed at the 3,000 funds believed to be registered in Ireland.
The plan is to make sure "the investor comes first'', said Jerry Kelly, chairman of the association. The code is a principles-based system that draws on codes from other jurisdictions, including the US and the UK.
It obliges directors to put the interests of investors above all others. It includes the following provision: "In the pursuit of investor interest, directors should be prepared to resign or take such steps that could lead to loss of office.''
In another radical provision, the code states that a majority of directors should be independent of the promoter of the fund. In a step that may prove controversial, it wants the performance of a chairman of a fund to be be discussed annually by the independent directors.
Boards should have a "formal schedule'' of issues reserved for just their consideration and decision.
Funds must adopt a code of corporate governance and include it in the report of the directors each year.
While the code has been prepared as guidance for members of the association who act as directors of Investment funds, the organisation hopes that it will be adopted by many funds based in Ireland