Governance of Collective Investment Schemes (CIS): Structural Support for Loyalty to Investors

Abstract

Until recently, structural measures of good governance in collective investment schemes (CIS) received less attention than corporate governance of publicly traded companies. As a result of the trading scandals in the US mutual fund industry that have occurred over the last few years, however, this has changed. International institutions, such as the OECD and IOSCO, have studied the governance structures of CIS in their member countries and issued guidance principles and some countries have introduced new legal rules to optimize governance in view of the principle that CIS have to be managed in the exclusive interest of CIS investors. This paper, which is written in Dutch, discusses the governance structure of Belgian CIS from this perspective. Rules and practices relating to governance principles or instruments such as investor empowerment through general investor meetings, independence and autonomy of CIS management versus other actors in the financial markets, and, most importantly, the role of the depositary, are critically analyzed. The main conclusion of this review is that it is not and never has been the role of the depositary of the CIS to function as a gatekeeper to ensure loyalty from the CIS managers to the interests of the investors. In practice, it is also impossible for the depositary to fulfill this function, as the manager of the CIS will never be prepared to share the necessary information relating to its own interests with a sufficiently independent financial institution acting as a depositary for the CIS. Therefore, the only solution lies in strengthening the independence of CIS day-to-day management versus actors with diverging interests, together with scrutiny by independent outside directors of decisions potentially influenced by conflicts of interest.