On August 18, 2016, IOSCO published a report outlining a proposed set of good practices on the voluntary termination of investment funds. The decision to terminate an investment fund can have a significant impact on investors, in terms of the costs associated with such an action or the ability of investors to redeem their holdings during the termination process. Therefore, IOSCO’s objective is to develop a set of good practices for the termination of collective investment schemes and other fund structures such as commodity, real estate and hedge funds, which take into account investors’ interests during the termination process.

IOSCO is proposing good practices on disclosure by investment funds to investors at the time of investment, so that an investment fund would provide information as to the general circumstances in which a fund can be terminated and the extent to which investor approval or consent is required to effect termination. Where a fund elects to merge its assets with another fund (often managed by the same responsible entity), as an alternative to termination, the responsible entity should clearly communicate the decision to investors. To the extent possible, they should only offer investors the option to merge where the receiving investment has similar investment objectives, policies and risk profile to the terminating investment fund. IOSCO also proposes that the responsible entity ensures that during the termination process appropriate and adequate information about the termination process is communicated to all investors. The consultation additionally seeks to address specific issues for commodity, real estate, hedge funds and private equity funds, who are more likely to hold illiquid or hard-to-value assets. Responses to the consultation are due by October 17, 2016.

The consultation is available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD542.pdf