EUROPEAN UNION: IOSCO have Published a Report on Good Practices for Termination of Investment Funds

Friday November 24 2017

The International Organisation of Securities Commissions (IOSCO) have published a report on good practices for Termination of Investment Funds.

This report sets out proposed good practices for the voluntary terminations of open-ended and closed-ended investment funds. The scope is not limited to retail investment funds as it also addresses issues of relevance to investment funds for professional investors.

Please see good practice points below:

• The responsible entity should disclose, at the time of investment, information relating to the ability to terminate an investment fund as well as the processes for effecting such termination.
• Investment fund documentation should set out how the responsible entity will deal with investors who are not contactable at the time a responsible entity decides to terminate an investment fund.
• The responsible entity’s decision to terminate an investment fund should take due account of the best interests of investors in the investment fund.
• Following a decision to terminate an investment fund, the responsible entity should issue a termination plan. This should set out the steps to be taken during the termination process and should take into account the best interests of investors.
• Taking into account the applicable regulatory framework, the responsible entity should consider suspending investor subscriptions and redemptions during the termination process of an open-ended fund with a view to protecting the interests of investors.
• The responsible entity should approve the termination plan. The board of the investment fund, or, if no such board exists, the third party responsible for independent oversight should also approve the termination plan.
• The responsible entity should clearly communicate to investors the decision to merge an investment fund with another investment fund.
• The responsible entity should offer investors the right to redeem free of redemption or exit charges before the merger takes place. Investors should be informed of the available alternatives sufficiently in advance.
• The responsible entity should incur all legal, advisory and administrative costs related to a merger. Where the responsible entity proposes not to incur these costs, this decision should be documented in the investor communication including a rationale for the decision.
• The responsible entity should ensure that appropriate / adequate information about the termination process is communicated to all investors concurrently and in an appropriate and timely manner. Investors should be kept up to date as circumstances change.

Please click on the above link for more information.