A proposal to require fund managers and even trustees to intervene in the corporate affairs of investee companies is ill advised, says the Association of Chartered Certified Accountants (ACCA).
Responding to the Government’s proposals for implementing the Myners report:
‘Institutional Investment in the UK: A Review’, ACCA says that it will be unreasonable to impose on institutional investors a legal duty to intervene in a company’s management when no other shareholders will have such an obligation. Fund managers acting on the strength of the proposed duty will also be at risk of being classified as ‘shadow directors’ of the company in whose affairs they are intervening, thereby assume significant responsibilities and liabilities.
John Davies, Head of Business Law at ACCA, said: “Fund managers already owe a duty of care to their clients. Together with any specific instructions which might be given by trustees, this should be sufficient to guide managers in deciding how to react to events in investee companies. Fund managers should not be routinely expected to intervene on wider, governance-related matters.
“ACCA also believes that the proposal to increase the standard of care expected of trustees in investment matters will need to be handled very carefully if it is not to result in more difficulties for pension schemes in recruiting suitable individuals to act as trustees. This problem is likely to be especially acute in smaller, defined contribution schemes “, said John Davies.