On August 25, the Board of the International Organization of Securities Commissions (IOSCO) published a final report (Report) on good practices for fees and expenses of collective investment schemes (CISs). The Report is published in the context of heightened regulatory scrutiny surrounding CISs and builds on existing standards with respect to CIS fees and expenses published in a report by IOSCO in 2004.
The good practices set out in the Report cover permitted and prohibited costs, remuneration for CIS operators, initial and ongoing disclosures of fees, performance-related fees, transaction costs, commissions, and changes to fees and expenses. It also covers issues arising when a CIS invests in other vehicles (including funds of funds).
While the Report published by IOSCO focuses on funds sold to retail investors, managers of wholesale funds (i.e., funds intended for institutional investors) also may wish to take the Report’s good practices into consideration, particularly in the context of ongoing regulatory scrutiny in the European Union and elsewhere, since many regulators consider that fee arrangements, even when fully disclosed, can give rise to conflicts of interest. IOSCO comments in its press release for the Report that high standards of transparency and conduct in this area should help encourage competition among CIS operators/fund managers and lead to a more efficient market, thereby eventually benefitting all investors.
The Report can be found here.
IOSCO’s accompanying press release can be found here.