- Demonstrate the reporting lines in the firm are functioning correctly
- Demonstrate the correct decision-making processes within the firm are in place
- Demonstrate the lines of responsibility in respect of investment decisions and compliance are clearly demarcated and ownership of tasks is therefore identified
- Demonstrate the correct people in the firm are making the relevant decisions
- Demonstrate that the senior management within the firm are in control of the firms functions and have accountability for any decisions made
- Provide a regular audit of the firm’s investment and advice process in order that any issues can be identified quickly and put right
- Demonstrate that the firm’s clients at the heart of their business and accordingly reduce any potential harm to them.
With this in mind, we believe an IC meeting should take place monthly with a more in-depth IC taking place on a quarterly basis. Under no circumstances should the IC be viewed as a ‘tick box’ exercise, it is something a firm should adopt with both enthusiasm and professionalism.
There is too much at stake not to do so and it can have an important positive effect on the firm, not least of which everyone within it can become involved and own part of the decision-making processes. It is another team building exercise.
The fundamental responsibilities of an investment committee are:
- To provide a frame of reference for suitable investments and their oversight
- To set an investment policy, objectives and limits
- To review performance and compliance
- To create a clear set of key performance indicators enabling progress to be measured
- To judge progress over time
- To recommend and approve policy changes
- To cascade information to the relevant stakeholders.
When it comes to the structure of an IC, this should typically include:
- Investment managers (those responsible for managing client portfolios)
- Investment advisers
- Chairperson
- Those with significant influence functions/compliance oversight (that is, SMF16)
- Any individuals responsible for investment research
- The firm may also wish to incorporate an independent third party on the committee to help scrutinise the firm’s investment activities from a different perspective.
It’s also very important that an IC has very clearly defined operational conditions, and a good investment committee will have the following attributes:
