Changes to the Board Structures of Fund Management Companies For UK Fund Structures, in response to changes in oversight rules from the FCA, will see the introduction of Independent Non Executive Directors (iNED’s) sitting alongside incumbent Management Company Directors for the first time.
The FCA thinking being to introduce an outside review of Value For Money (VFM) to the annual review process which the iNED will sign off on.
This hybrid role will bring iNED’s into the management companies of UK Funds for the first time. Initially it will create about 300 new positions. The iNed’s will be in a minority on each Board, likely making up 2 out of 8 on the Board, and the Chair of the Board will remain a management company executive and be the SMCR responsible person. However as in any Board all Directors will have collective responsibility.
It is likely that the complexity of understanding what is going on in the management company will mean that both members of the Board will have to have had previous experience gained in the Fund Management world. The major reason for the inclusion in the Management Company is to evaluate the Value For Money of the current products of the Fund Manager. However there could be a case of one having direct experience and another bringing in specialist skills such as B to C tech development. Perhaps the experience of Ireland under the Guidance of CP 86 issued by the Central Bank will be a useful guide for all embarking in this role. This combined with the Luxembourg Directive issued by the CSSF on the Management of UCITS in August 2018 give useful reference papers on regulatory thinking.
Personally I think that any iNed taking on the role should also look to take on further “independent”responsibilities. Besides the envisaged Value For Money review of the management company’s activities they should lead on developing Independent Risk Management of the Management Company and Fund Managers. Also acting as iNed’s they should look to provide an independent conduit for whistle blowing for the Management Company Executive Directors and staff. The experienced offshore iNed’s living in the UK will bring a lot of added value into developing the role going forward.