Statement of Guidance - Corporate Governance for Mutual Funds and Private Funds (April 2023)

Summary

This is a Statement of Guidance (SOG) issued by CIMA in April 2023 setting out minimum expectations for the corporate governance of regulated mutual funds and regulated private funds. It applies to the 'Operators' of such funds, defined broadly as the governing body of the fund. It covers regulated mutual funds under the Mutual Funds Act (licensed, administered or registered) and regulated private funds registered under the Private Funds Act.

• Operator means: the board of directors for a corporation, the general partner for a partnership, the manager for an LLC, or the board of trustees for a trust.

The guidance describes what CIMA expects of Operators across several areas. It is principles-based guidance rather than a prescriptive rulebook, and expectations scale with the size, complexity, structure and risk profile of each fund.

• Oversight of the fund and its service providers.
• Management of conflicts of interest.
• Frequency and documentation of Operators' meetings.
• Duties owed to investors and the fund.
• Delegation and monitoring of service providers.
• Risk management oversight.
• Candid, proactive communication with CIMA about material adverse developments or non-compliance.

As a Statement of Guidance, it does not itself create new statutory obligations but sets CIMA's supervisory expectations against which it will assess Operators' governance practices. Failure to meet these expectations can be relevant to CIMA's regulatory assessment of a fund's Operators, even though the document uses largely non-mandatory ('should') language alongside some mandatory ('must') statements.

Key obligations

• Operators must suitably identify, disclose, monitor and manage all conflicts of interest, with disclosures documented consistently with the fund's constitutional/offering documents, and all conflicts of interest disclosed at least annually.
• Operators should convene at least once a year, meeting more frequently where the fund's size, complexity, structure or risk profile requires it.
• Operators must exercise independent judgement, act honestly and in good faith, and act in the best interests of the fund and its investors.
• Operators must make relevant enquiries into matters within their responsibility, document concerns raised and corrective action taken, and ensure timely appropriate action.
• Operators must oversee and supervise each regulated fund for which they act, and assess capacity before taking on additional funds.
• Operators are responsible for ensuring, on registration/licensing and continuingly, that constitutional/offering/marketing documents comply with applicable laws and regulatory measures and adequately describe investment strategy, conflicts policy and investment interests.
• Operators are responsible for approving appointment and removal of service providers and contract terms, and must ensure investors and the Authority are notified of material changes to such appointments.
• Operators must satisfy themselves that service providers to whom functions are delegated perform in accordance with their contracts, and must regularly monitor whether the investment manager performs in accordance with defined investment criteria and strategy.
• Operators should review and approve the fund's financial results and audited financial statements, and monitor the net asset valuation policy and its application.
• Each Operator must perform functions with the care, skill and diligence of a reasonably diligent person with relevant knowledge and experience, and should assess individually and collectively whether it has sufficient knowledge and experience to fulfil its duties.
• Operators are responsible for ensuring a full, accurate and clear written record is kept of Operators' meetings and determinations, including agenda items, attendees, decisions, information exchanged with service providers, and conflicts of interest declarations.
• Operators should disclose to CIMA, in a transparent and honest manner, any matter that could materially and adversely affect the fund's financial soundness or going-concern status, and any non-compliance with applicable acts, regulations or regulatory measures; where uncertain whether disclosure is required, Operators should err on the side of communicating with the Authority.
• Operators should provide suitable oversight of the fund's risk management, discussing material risks at Operators' meetings and taking appropriate action where necessary.

Applies to

regulated mutual funds, regulated private funds, Operators (Board of Directors, General Partner, Manager, or Board of Trustees of a regulated fund), service providers to regulated funds