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FCA vows to press on with independent fund directors

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FCA vows to press on with independent fund directors

The Financial Conduct Authority has reiterated its intention to require fund boards to appoint two independent directors, one of the more controversial pledges in this year’s major sector probe.

Writing in July’s Asset Management Study, the regulator said ‘introducing a greater degree of independence to the relevant decision making bodies [would] rebalance competing interests’ in favour of unit holders.

That has been subject to some industry pushback however, with companies questioning whether there were enough appropriately qualified individuals in the UK to fill the number of positions that would would be created.

In a speech to yesterday’s Investment Association annual dinner, FCA chief executive Andrew Bailey (pictured) said that the regulator was asking no more of the sector than investors asked of the businesses they backed.

‘Our recommendations on fund governance and the effectiveness of boards and the role of independent directors are an important part of ensuring the interests of investors,’ he said.

‘“Strong boards are more likely to align business interests with those of investors”. Who said this? Well, I think it is what the investment management industry frequently, and correctly says about the firms in which it invests, and it’s what you demand. It’s a general principle.’ 

Speaking to Wealth Manager following the release of the study in June, a number of sector bosses said that the sheer number of directors required across the industry presented challenges.

If directors for hire ended up working with a unsustainable number of funds the industry would likely be left in a worse position that before, paying for box-ticking with little improvement in governance, they added.

Citywire AAA-rated David Stevenson, who manages the UK Smaller Companies fund at Amati Global Investors, said: ‘It is a good measure but I would not be in favour of appointing people on boards just for the sake of it. They should be able to offer guidance and contribute.

‘Before [our recent purchase by] Mattioli Woods we had an independent director who was a retired head of a fund-managing group.

'He was a voice of experience and a very useful one to have. But people like that are hard to find – they are not exactly hanging from the trees.’

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David Stevenson
David Stevenson
2/56 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 93.37%
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