Investor Presentaiton
Certain experts say that, although the separation of roles is needed to improve governance,
it is not a panacea. They underscore the fact that fiduciary power risks being "illusory" if the
manager or the entity the manager is supposed to supervise continues to have the power to
terminate the fiduciary's contract. These experts insist on the need to provide the fiduciary
with the proper tools to perform its job. Some industry players take the same view when
they call for enhancing the fiduciary's role as exercising ultimate control over the fund. In
the event the fiduciary cannot carry out all of the functions needed to administer the fund,
the other parties should be independent of the fiduciary.
Other industry representatives assert, however, that the separation of roles could adversely
affect the viability of some small firms owing to the additional costs they would incur that
would eventually be passed on to investors. Other spokespersons even invoke the possibility
that this separation constitutes a barrier to entry for the smallest companies in addition to
affecting the biggest institutions where the problem of confusion of roles does not arise.
That is why, these advocates assert, one would have to accurately assess the "real" impact
of such a measure on investor protection in the mutual fund sector. The Autorité shares this
viewpoint. Indeed, it recommends that a suitable assessment be made of the risks that
would be likely to result in investor losses in order to prescribe the appropriate regulation. It
also raises the issue of harmonization with the rest of Canada, which merits particular
attention.
Questions
1. Would you favor the separation of roles in the mutual fund industry?
2. In your opinion, what are the benefits and drawbacks of such a separation?
3.1.2 Forming an independent review committee
There are several situations in today's mutual fund industry, like in the investment fund
industry generally, where the management company's interests could come into conflict
with those of investors. Autorité des marchés financiers identifies two types of conflicts:
➡ Structural conflicts, which arise when the management company offers to acquire
the securities of an issuer with which it has ties. Whether it conducts the trades on
Consultation paper
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