Guidelines of conduct as a manager
The manager should implement a code of ethics to demonstrate integrity.
The manager operates under a duty of care to the vehicle which has appointed it, and, through the vehicle, to investors. Investors, when deciding to invest, have usually relied upon the manager’s track record, and its acknowledged standing, integrity and reputation. The manager needs to be able to satisfy both the vehicle and investors that it has performed its duties with the required degree of integrity, and that it has behaved ethically in its dealings with the vehicle, non-executive officers, investor representatives, the vehicle’s external advisers and investors.
The manager should exercise the necessary control over its staff, external advisers and third party service providers to ensure that it can operate in the best interests of the vehicle and its investors.
The manager has to demonstrate to investors that it has the required skill to meet its obligations as a manager. This may include using third party service providers. See section 3 of the Corporate Governance Assessment tool. The manager is expected to have the required level and quality of expertise in terms of staffing, external advisers and third party service providers, as well as the necessary resources, in particular:
- adequate number of properly trained staff with the required level of experience, qualifications and skills;
- access to competent external advisers and expert service providers in the relevant jurisdictions, each of whom has an adequate system of internal controls and reports regularly to the manager on the effectiveness of such a control framework.
The manager should follow INREV guidance.
The manager, in order to show that it has acted and is acting diligently, both upon the establishment of the vehicle and during its life, is expected to be able to demonstrate to investors that it conducted the necessary due diligence (in line with the INREV due diligence protocol) upon the establishment of the vehicle, and that the vehicle is legally able to adopt its strategy to achieve its anticipated returns.
The manager should implement an agreed policy on risk identification and management for the vehicle, and establish and maintain a permanent risk management function.
The manager should identify risks early and manage them in a timely and proper manner. The manager needs to be able to show that potential risks are identified, monitored and managed quickly and diligently. This can only be achieved if the manager has competent staff, external advisers and service providers with the requisite expertise. The manager should also implement an adequate system of internal controls and ensure that information on the effectiveness of such a control framework is provided regularly to investors. See section 3 of the Corporate Governance Assessment tool.
Guidelines of conduct as a non-executive officer
Non-executive officers should have the appropriate level of skill, training and access to external advisers and service providers to ensure that the interests of investors are protected.
Non-executive officers should be appropriately trained so as to be up-to-date on relevant issues, and to have access to the vehicle’s external advisers and service providers. In particular, non-executive officers need to have the opportunity to discuss with the vehicle’s external valuers matters regarding property valuations.
Non-executive officers should ensure the monitoring of internal controls, risk management and reporting.
Non-executive officers should satisfy themselves that the manager has in place secure systems which monitor the vehicle's activities, that adequate internal controls are established by the manager to identify and manage risks on a timely basis and in a proper manner, and that the manager complies with its reporting obligations in a regular and timely manner.
Non-executive officers should have regular meetings with the manager and other external advisers and service providers, and with investors (if appropriate, with the manager absent), when considered necessary.
Non-executive officers are expected to attend meetings with the manager, other external advisers and service providers, and with investors when circumstances require, and to refer to investors’ matters of concern. See section 3 of the Corporate Governance Assessment tool. They may also need to call upon independent professional advice. To ensure that non-executive officers are able to act free from influence by vehicles or managers, it is necessary that they have the opportunity to discuss freely and openly with investors (without the manager being present) matters of a particularly sensitive nature.
Guidelines of conduct as an investor
Investors should employ staff or other resources with the requisite market experience, skills, expertise and knowledge.
Investors need to ensure that they and their representatives have had the appropriate training and are up-to-date with relevant developments, so as to be in a position to seek the appropriate information from the vehicle or the manager in understanding the performance and development of the vehicle. Investors should act diligently when requested to consent to proposals made by the manager, and should respond in a timely and proper manner.
The constitutional terms of the vehicle should contain provisions dealing with circumstances in which investors fail to meet their obligations to the vehicle. See section 3 of the Corporate Governance Assessment tool.
Investors should act diligently to assess and monitor the identification and management of risks.
Investors should obtain from the manager, before investing, information they consider necessary to satisfy themselves that the vehicle strategy is appropriate, that the risks are appropriate relative to the rewards, and that the manager has the requisite experience and resources (human, financial and information) to be able to deliver the expected returns. INREV has published a recommended questionnaire for investment evaluation to assist investors in their due diligence investigations.
Investors should regularly review the performance of non-executive officers, and should periodically ratify their reappointment.
Investors will need to be satisfied that non-executive officers are properly performing their role to protect the interests of investors and so should assess their performance annually.