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Duty of loyalty

            In practice, fund committees may involve with transactions with parties in interest (“conflict of interest” transaction). Parties in interest are people or organizations who have close ties to the fund such as employer, asset management company, custodian, auditor, etc. Examples of conflict of interest transactions are:
  • An asset management company will offer a gift to the fund committee if it is selected for the next contract.
  • An employer asks an asset management company not to pay a resigned member because he is still in debt with the employer.
Practice
You must have a guidelines manual which includes the ethical and appropriate ways of practice in dealing with transactions with parties in interest as follows:
  1. Conflict of Interest transaction: You should set practice guidelines and an investment procedure in dealing with conflict of interest transactions.
  2. Selecting service providers: You should have a standard selection procedure and information disclosure when selecting service providers such as asset management company, fund administrator, custodian, or auditor.
  3. Payment to members: You are responsible to give payment to fund members within 30 days after membership termination.
Thus, you should also set payment guidelines to ensure that members will receive payment within the specified period.

last updated date 09/06/2553

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