1st Edition

Regulation and Governance of Mutual Funds United Kingdom and United States of America Perspectives on Investor Protection

By Mohammed Khair Alshaleel Copyright 2023
    272 Pages 16 B/W Illustrations
    by Routledge

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    This book provides a detailed analysis of mutual fund regulations and governance in the UK from the investor protection perspective. It comprehensively describes mutual funds by their function, social utility, and legal attributes, examining the level of protection provided to retail investors under existing regulations.

    Mutual funds are externally managed with fund ownership separated out from their management, which carries a potential conflict of interest between the self-interests of the fund management and each fund’s investors. The book provides an in-depth analysis of this agency problem in the mutual fund industry, comparing the competing governance models in the UK and the US and the supervision of management activities. In the UK, it investigates the main governance mechanisms, including disclosure, the effectiveness of voting rights, and the role of the Financial Conduct Authority in protecting investors. It also considers the role of prudential regulations in protecting mutual fund investors, with a particular focus on risk management and mutual fund liquidity crisis. The book further investigates the impact of the withdrawal of the UK from the European Union (Brexit) on the industry and what this means for the future of the undertakings for collective investment in transferable securities (UCITS) in the UK.

    The concept of mutual funds is still not clearly understood, so this book will clearly define the different legal and practical aspects of mutual funds. It will be the first substantial study of mutual fund governance mechanisms under the existing mutual fund laws and regulations in the UK.

    Chapter 1: Introduction

    1.1 Scope and Purpose

    1.2 The Concept of Mutual Funds: Meaning and Terminology

    1.3 Open-ended Retail Mutual Funds

    1.4 Structure and Outline


    Chapter 2: Mutual Funds: Meaning, Forms and Operations

    2.1 Introduction

    2.2 Concept of Mutual Funds

    2.3 Role of Investment in Mutual Funds

    2.4 Hedge Funds Versus Mutual Funds

    2.5 Classification of Mutual Funds

    2.6 Operation of a Mutual Fund

    2.7 Legal Nature of Open-Ended Investment Companies and Unit Trust

    2.8 Conclusion

    Chapter 3: Mutual Funds: Growth and History

    3.1 Introduction

    3.2 Growth of the Mutual Funds Industry

    3.3 Brief History of Mutual Funds

    3.4 Conclusion


    Chapter 4: Mutual Funds Regulation: The United Kingdom

    4.1 Introduction

    4.2 Objectives of Financial Regulation

    4.3 Existing legal Framework of Mutual Funds in the United Kingdom

    4.4 Valuation and Pricing Regulations

    4.5 Delegation of Functions

    4.6 Winding up Mutual Funds

    4.7 Conclusion

    Chapter 5: Mutual Funds Prudential Regulation: The United Kingdom

    5.1 Introduction

    5.2 Prudential Regulation: Objectives and Tools

    5.3 Mutual Funds Risk Management

    5.4 Liquidity Risks Management in an Evolving Mutual Fund Industry

    5.5 Mutual Funds Investment Limits: Prudent Spread of Risk

    5.6 Conclusion

    Chapter 6: Governance of Mutual Funds: Comparative Accounts of the United Kingdom and United States

    6.1 Introduction

    6.2 Conflicts of Interest: Agency Problem Theory

    6.3 Definition and Scope of Governance

    6.4 Competing Governance Models: Corporate Versus Contractual Model

    6.5 Agency Problems as a Challenge to Governance

    6.6 Disclosure as a Regulatory Tool in Mutual Funds Governance

    6.7 Effectiveness of Voting Rights in Mutual Funds Governance

    6.8 Role of the FCA in Protecting investors

    6.9 Conclusion

    Chapter 7: Regulation of Undertakings for Collective Investment in Transferable Securities: The European Union

    7.1 Introduction

    7.2 Development of the UCITS

    7.3 Separation of Management and Supervision Functions: The Foundation of Investor Protection

    7.4 Non-UCITS

    7.5 EU Passports

    7.6 Shareholder Rights Directive II and its Implications for UCITS Managers and Investors

    7.7 UCITS and Brexit: Loss of Passporting Rights

    7.8 Conclusion

    Chapter 8: Mutual Funds and Investor Protection in the United Kingdom: Past, Present and Future

    8.1 Framing Investor Protection in Mutual Funds Regulation and Governance

    8.2 Concluding Comments


    Mohammed Khair Alshaleel is Lecturer in Financial and Commercial Law at the University of Essex, UK.