Fund Governance Structure

This thesis dims ttt discussing the basic lzlws of CIS (c()11octiu'investment schemes) governdnce which is the mcchdnism thdt pr()videsprotection for the interest CIS inves tors. -CIS is helpful for the deve1opment and stabi l i ty of security marketand finance deepening which promote economic development. But thefoundation of CIS is the mechanism that is ca1led CIS governance which c2[nprotect investment interest effecti ve1y because the mora1 hazdrd exist smore seriously in CIS than in other financial instruments such as bankdeposit, stock and bond. The importance of CIS governance is proven hytheory and history..After reviewing the study of c()rp()ration govornance which is wide lystudied, the trame work ot C1S governdnce is cL)nc1uded. As a set ()tmechdnism of so1ving moral hazdrd, Lhe CIS inc1udes interna1 governdnccand externa1 govcrnance. Interna1 governance rofers to the incenti vecontract arrange and the balance of the parties involved in the CIS.Externa1 governance refers to the discipline enforced by market andexterna1 supervision by publ ic supervisory body. F()l lowed by this the threeimportance aspects are di scussed deep1y. First1y, the contract of theinVestor and the investment company. Wi th the incen t ive mode1 in asymmetriceconomics, the author discovers the ettcctiveness of incentive contractbetween the CIS investor and the management company is 1 imi ted due t() theunba1ance of interest and the cost ()f' ()versecing by individua1 invest()rby himself. So it is necessary to intr()duce monitor. Second1y, the arrangeot overseeing in CIS. ()nce the third pz1rty wh:ch 17 ldys a ro1e of w;itch--d()gis introduced another pr()b lem of m()r;l ] hazard tlf()m the moni t()r incurs.There are two kinds of moni t()r: the t:custee i1nd the b()ard contr() l lcd l>Yexterna1 diroctors. The etfectiveness (i lf' the m()ni [()r is deep1y d iscusseci.Last 1y, the lnterna1 governdncc ()f C l S fnEtnagemen t c()mpdny. A g()()d prdc t1 ccof governdnce of management c()mpany i s l1e 1pfu1 f(J l- CI S g()vernL1nce, wh i (.l1is stipu1ated by 1aw. Interntl1 c()n tfll() l ()1 man;lgement is Particulf1r l ynecessary t() ClS management. ln th 1 s pzlrt, the;ippra1se stdndztrd { ) f'etfec ti ve ()t' governance dnd the iippr;li se index system ()f in vestmer1 tDerf()rmance dre al so di scussed.Corporate CIS and contract C1S;lco tw() basic lcinds of CIS in terms () r'1aw hase. 'rhere zlre dif't'erent t'()rms in the same ki nd ()f CIS. The c()re (l IjCIS governztnce 1 ies in which pers()ns wh(J i1re sep;iJf;lte from the mdndgemer1 tc()mpany act i1s the monit()rs. In fact, there dre two kinds ()f c()ntract,the trust C1S which is based ()n trust l iiw and thu Eur()pean C()ntinent;l [contract CIS which is based ()n the c()ntract 1aw. N() matter ()f the f()j-mof contract CIS, there are some part i cu 1ar arrangements for pr() tec ti ng theinterest of investors. For exaJnp1e, independent directors is required 1 nthe management company in Germany and Austra1ia, with the emphasis ()n theexterna1 governance. Then a compare study between Corporate CIS andcontract CIS. Although some advantdges +exists in contract CIS,cbrporate CIS is better than contract CIS in the light of protecting theinterest of investors. In practice, more and more c()untries has intr()ducedthe corporate C1S, some contract CIS countries reformed the governance.Moral hazard are more serious in cIosed--end CIS than open--end C1Smainly because the 1ack of the redemption of the investment from the CIS,as a resu1t open--end CIS had dominate the market. But another proh lem areput forward that is how to exp1ain the growth ()f c1osed--end CIS. Fourreasons are conc1uded. Large part of this chapter is to find the g()od waysto get a better protection for the investors. The improvement of governancein c1osed--end CIS 1ies in opening and reconstructing the CIS.Externa1 supervision may gllarantee the basic ()rder of th...