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Eurekahedge - The Role of Independent Directors in Offshore Hedge Funds http://www.eurekahedge.com/news/04july_archive_news_bearnes.asp
Since these scandals have erupted, governments have introduced reforms for publicly Final Charity Updates from the
held companies and stock exchanges have introduced new rules and regulations and Asian Hedge Funds Awards
corporate governance guidelines. 2009
In the hedge fund world we have seen the implosion of the Manhattan Fund and more Interview with Dharmin Mehta,
recently the Lancer funds. COO of Capveda Asset
Management Limited
The scandals have shown a serious lack of effective oversight of corporate accounting
and financial reporting and a lack in managing conflicts of interest.
The More Things Change, the
The U.S. Securities and Exchange Commission is increasing its regulation of onshore More They Stay the Same
mutual funds and is considering some form of regulation of hedge funds. The offshore
hedge funds industry must consider evolving with these developments - investors will The Sophisticated Choice
require it.
Back Down the New Haven Line
A common theme of new reforms is the substantial enhancement of the independence
and responsibilities of boards of directors. New PE Firms Hedge Bets with
Pledge Funds
What is a Director
The Integration of ESG in
The role was invented centuries ago, dating at least since the establishment of the Emerging Markets
Dutch East India Company in 1602.
Islamic Foreign Exchange Swap
The basic function of directors is to oversee the affairs and activities of the company.
as a Hedging Mechanism
The company is a legal person - it has shareholders who legally own the enterprise. It
Perspective
has an elected committee (known as the board of directors) who exercise delegated
authority (as agents of the shareholders) to manage the enterprise in accordance with
formal rules, specifically the memorandum and articles of association (or constitution)
but also the provisions of company and other laws in the jurisdiction in which it is
established).
These rules vest the power to control and manage the company's property and affairs
in the board of directors. The director's central mission is to be diligent in
representing the interest of shareholders.
However a fund does not normally have employees of its own. Its operations are
typically conducted by enterprises hired by the fund. The fund's property, or
investment portfolio, is managed by an investment manager or adviser. A custodian
holds the assets, maintaining them separately to protect the shareholders interests. It
may have a prime broker through whom trades are executed, either directly or
indirectly, and financing and leverage facilities are made available. It will have an
administrator who maintains the books of account and produces the net asset value
calculations. It will have a registrar or transfer agent who processes all orders to buy
and sell the fund's shares and maintain its register of shareholders and it may have a
distributor or placement agent or sponsor who will promote and sell the shares to its
clients. It will also appoint outside law firms (both lead and jurisdictional) to provide
legal services to the fund. The fund, through its board of directors, is responsible for
negotiating and overseeing contracts with each of these enterprises who provide
services to the fund.
Under this structure it can be seen that the interests of the fund and its shareholders
differ from the interests of its investment adviser or management company.
Duties of Directors
2 of 3 12/29/2009 1:31 PM
Eurekahedge - The Role of Independent Directors in Offshore Hedge Funds http://www.eurekahedge.com/news/04july_archive_news_bearnes.asp
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