On 26 September, the EBA and ESMA published joint Guidelines on assessing the suitability of members of management bodies and key function holders.
The primary aim of the Guidelines is to
The Guidelines establish common criteria for the assessment of the suitability of Board members and key function
This is another example of regulators continuing to focus on firms' governance, culture and conduct, not just within Europe, but around the globe. Outside Europe, there is little
Topics such as best execution and trade allocation, and payments for investment research are at the forefront of regulators' and firms' minds as the implementation date for MiFID II looms large.
Also, asset managers are being held to account for stewardship of their clients' assets. Some countries, such as the Netherlands, have issued or enhanced their corporate governance code. The codes are designed to encourage long-term value creation and high-quality corporate culture within investment firms. They usually cover relations between the management and supervisory boards and the shareholders. They might be prescriptive in some areas, such as appointment periods, board composition, independence of directors, and reporting.
The governance of investment funds is, too, receiving special attention. The obligations imposed on fund distributors by MiFID II - in particular, on securing information from product providers on their product governance process and on each product's costs and charges - is requiring a number of fund managers to review their current product governance processes and structure. National regulators are intensifying the spotlight on fund governance with their own reviews of management company effectiveness. For example, Ireland, Luxembourg
The highly-charged subject of costs and charges continues to gain momentum, with ESMA releasing a paper on the impact of charges on mutual fund returns - more on that in a future edition of Regulatory Insights. And the debate on delegation of key functions (such as portfolio management) out of the EU is causing both the industry and regulators to make public their views.
All these developments point to the need for firms to review their governance arrangements in the round, and to ask themselves challenging questions about what their culture and conduct look like in practice.
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.