IRC Partner Meets the Challenges Faced by Investment Funds and IRCs

IRC Partner^™ is the first and only software-based product built from the ground up to meet the unique needs of the Canadian mutual fund sector and the CSA NI 81-107 directive.

Post November 1^st IRC Requirements

Now that November 1^st has come and gone, many fund managers are left with the challenge of being legally required to have appointed an IRC with a written charter; completed conflict identification and created a policies and procedures manual for dealing with the conflicts identified.  This is in addition to the test of creating an effective and efficient IRC. 

This article looks at what Funds and their IRCs are required to do not that full compliance to NI 81-107 is now mandatory.

Webinar Invitation - February 20th, 2008, 1:00 PM & 3:00 PM EST

"NI 81-107 - Ask the Experts: Compliance Requirements, Best Practices, and Preparing for the Upcoming Regulatory Filings and Reviews"

Our Experts Include:

William Woods, President of Independent Review Inc., a professional provider of independent governance services and well-known author on IRC best practices and related services.

Catherine Connally, CIA, President of Issues Central, Inc., a 27 year veteran of internal audit management, financial systems development and implementation, and executive management.

Click here to register

Alternately, book a one-on-one demonstration of IRC Partner.

Case Study - Sceptre Investment Counsel

Learn how a well established Fund Manager, Sceptre, met their compliance obligations prior to the November 1^st, 2007 deadlines.

“The key to expediting the project was the expert and comprehensive content included in IRC Partner”    - Sandy Kwan, AVP and Controller

National Instrument 81-107   The CSA introduced NI 81-107 to enhance investor confidence and protection in the mutual fund industry by requiring an independent oversight of conflicts of interest that arise for fund managers during the operation of the investment fund. NI 81-107 requires investment funds that are reporting issuers to establish a fully independent body called an Independent Review Committee (IRC) whose role it will be to oversee all the decisions of the fund manager in the operation of the investment fund that involve either an actual or perceived conflict of interest.

What are the Current Requirements?   NI 81-107 required investment funds who are reporting issuers to establish an Independent Review Committee (IRC) by May 1st, 2007 whose responsibility it is to review all decisions involving a conflict of interest faced by the fund manager in the operation of a fund following the November 1st, 2007 final compliance date.   To be compliant with NI 81-107 for November 1st investment funds were required to appoint an IRC, create a written charter, identify any potential (real or perceived) conflicts that may exist on November 1st, and create a policy and procedures manual that deals specifically with the conflicts identified.  For many funds, this proves to be a resource-intensive and time-consuming effort.   To maintain compliance post November 1st investment funds and their IRCs will be tasked with a variety of documentation and administrative requirements that many organizations will find onerous and that will require significant amounts of time from the IRC and the Manager to ensure that compliance with this legislation is not only maintained but will be audit-proof. Some of these tasks include: Scheduling and attendance of IRC meetings Review conflicts of interest by the IRC that are referred to it by the manager. The IRC is required to provide recommendations or approvals where required under NI 81-107 for each conflict referred to it Record keeping of meetings and IRC activities Annual assessments of the IRC as a whole and the individual members Annual independence review of members Annual review of IRC member compensation and expenses Annual review of the Charter and of the fund manager’s polices and procedures Annual review of any standing instructions and the fund managers compliance with the standing instructions or approvals given Report in writing on its findings to the fund manager after completing the required annual assessments Prescribed report to securityholders that must be filed with the regulators and made available for securityholders via postings on the fund manager website(s) Determine recruitment requirements considering IRC member appointments and term limits Continuing Education   The following article further explains the responsibilities of fund managers and the IRC.

IRC Partner™ Solution   IRC Partner™ is the first software-based product built from the ground up to meet the unique needs of the Canadian mutual fund sector and the CSA NI 81-107 directive.  It is designed with over 50 best practice templates that are industry and legislation specific for post November 1st operations and IRC documentation benchmarking. This, combined with its the ability to assist you in tracking and reporting on all of your IRC activities for post November 1st compliance make IRC Partner™ the optimal NI 81-107 compliance tool.  After your IRC is a functioning unit, and all initial requirements are met, IRC Partner™ will also help you and your IRC meet all on-going, annual requirements. IRC Partner™ Meets the Challenges Faced by Investment Funds.

Your IRC Challenges Solved   Challenge #1: Urgency NI 81-107 was finalized in June 2006 and called into force in November of 2006.  The instrument requires each investment fund to establish an IRC and be operational for November 1, 2007. The instrument requires significant documentation and administration of IRC operations and activities commencing immediately following the November 1st operational deadline. With the heavy focus over the last 12 months on meeting the May 1st and November 1st compliance deadline, many organizations find themselves unprepared for the post November 1st compliance requirements, not to mention the need to create sustainable operations. þ      The IRC Partner™ framework and tools empower the fund and IRC with the information and tools to efficiently and effortlessly maintain their compliance. þ      IRC Partner™ provides step-by-step guidance and precedent documents -- for instance a draft charter, draft policies and procedures, member service agreements -- that would enable a fund to establish an IRC with less reliance on external service providers.   þ      Once the IRC is established, IRC Partner™ provides analytical tools and reporting to enable the IRC to evaluate potential conflicts and make recommendations, once again reducing dependence on external providers for advice. Finally, IRC Partner™ also provides rapid documentation to support written recommendations and annual reports.   Challenge # 2: It’s not what you’ve done but what you can prove that you’ve done IRC members want to ensure that they are able to perform their duties in the most efficient manner possible while Managers want to ensure that their IRCs have followed a course of due diligence as they review each conflict of interest referred to them by the manager ensuring that their documentation will withstand review and audit. þ      IRC Partner™ provides analytical tools and immediate, on-demand reporting to enable the IRC to evaluate potential conflicts and make recommendations, including a conflicts review process. þ      IRC Partner™ also provides rapid documentation to support written recommendations and annual reports. Challenge # 3: Managing Costs through Effective Time Management As IRC committee members will be paid an annual fee and/or per meeting fees by the fund, organizations are eager to reduce the amount of time that their IRC will spend on IRC duties.  Additionally, the IRC will be able to hire outside counsel and consultants to assist them.  These costs, if unchecked have the potential to become significant. þ      IRC Partner™ is designed to make IRCs more efficient in their activities by reducing the amount of time required to evaluate conflicts and generate reports. þ      IRC Partner™ will dramatically reduce the time required to document and maintain your documentation for all your IRC processes by providing you with over 50 best practice templates to help you address your IRCs operational needs. þ      IRC Partner™ will also help reduce the opportunity cost of a fund managers time by reducing the amount of time that management must spend on setting up and maintaining the IRC process. Fund managers will be able to focus on the business of providing value to securityholders rather than being tied down on compliance issues. Challenge # 4: Risk of Noncompliance Larger than any potential administrative or legal penalties that may be associated with non-compliance with NI 81-107 or mismanagement of the conflict of interest procedures is the risk to the reputation of the investment fund and investment fund manager in the marketplace if conflicts of interest are not properly dealt with and disclosed. þ      IRC Partner™ will allow a fund manager to instill confidence in the integrity of the investment funds conflict of interest procedures by creating a solid framework for documenting its conflicts of interest and the IRCs handling of those conflicts. þ      With the backing of the Thomson Carswell name and our expertise in compliance, IRC Partner™ is a solution that you can rely on to provide up-to-date, reliable content that will greatly ease the burden of IRC Compliance.

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