IFIA Corporate Governance code for Fund Service Providers
This initiative by the Irish Fund Industry Association (IFIA) to introduce a Corporate Governance Code for Fund Service Providers (the Code) follows on from the IFIA’s Corporate Governance Code for Collective Investment Schemes and Management Companies (2012).
The Code’s purpose is to provide the board of directors of Administrators, Custodians and Depositaries authorised and regulated by the Central Bank of Ireland (collectively “Service Providers”), with a framework for good corporate governance and. The Code provides a set of principles and guidance but is not intended to be prescriptive but instead provides a codification of existing practice combined with what is seen as good international practice.
Although the Code is voluntary, adoption is recommended by the IFIA, with a 12 month transitional period. A Service Provider's level of compliance with the Code should be disclosed in the Director’s report accompanying the Service Provider’s annual report for years commencing on or after 1 January 2015.
The Code is broken into sections, as detailed below:
- The Board’s composition must be of sufficient size and expertise to adequately oversee the Service Provider’s operations. The Code recommends a minimum of three directors, including two Irish resident Directors. Two directors must also be reasonably available to meet the Central Bank at short notice.
- The Board shall specify the time commitment it expects from each director; Directors shall document their other time commitments, including time devoted to the boards of collective investment schemes, both Irish and overseas.
- The Board shall review potential conflicts of interest, both personal and professional, when considering potential board members. The composition must be reviewed every three years. Appointments require approval from the Central Bank, and departures require notification with reasons for the departure and confirmation that the departure is not linked to issues with the Service Provider. Administrators shall not share directors with Depositaries. Directors shall comply with the Central Bank’s ‘fitness’ requirements, disclose all directorships to the Board and be aware of all relevant duties, regulations and obligations. The Board must also be constituted so that no one person has unfettered control.
- The Code also mandates that a Board must have a Chairman, who can be either a non-executive director or an independent non-executive director. The roles of Chairman and CEO shall remain separate: a former CEO of an organisation may be appointed Chairman after a three year interval. The position of Chairman shall be reviewed every three years.
- The role and responsibilities of the Board must be clearly documented. The Board may delegate activities to committees or management to act on its behalf, but must implement mechanisms for documenting and monitoring the delegation. The Board remains responsible for delegated activities, as well as for any activity outsourced by the Service Provider.
- The Board is responsible for appointing appropriately qualified senior management, including a CEO. The Board shall meet as often as appropriate, with at least two meetings per half year. One meeting per year must be in person. An agenda, minutes and supporting documentation (including risk, compliance and finance materials) must be circulated in advance. Minutes must detail decisions, actions and discussions.The Board must document a ‘conflicts of interest policy’, and must consider changing the membership of the Board if conflicts continue. The Board may establish committees, who shall minute their meetings and report to the Board.
Service Providers should consider adopting the code and where necessary address any potential compliance gaps in their current governance structure.