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What is a Norwegian fund?
Under Norwegian law a fund is classified as a special type of legal entity which is created when its articles of association are approved by the Norwegian FSA. All funds have their own organisation number and are registered in the Norwegian register of Business Entities.
A Norwegian fund is semi-contractual, based on the articles of association, and does not have its own board of directors, managing director or employees. A management company (SKAGEN AS) is appointed through the fund's articles of association, and it is the management company who then acts on behalf of the fund. SKAGEN's funds and the units of the fund are registered in the company's unit holder register.
All clients can vote
Unit holders may influence the fund's management by representation on the management company's board of directors, and according to law, the unit holders shall appoint at least one third of the Board members. All unit holders may participate at SKAGEN's annual election meeting to vote in their preferred representative.
In order to ensure that the members appointed by the unit holders are independent from the management company, an election committee has been established whose responsibility it is to propose candidates for the Board. All unit holders are able to propose Board candidates via the election committee.
Fund supervision in Norway
SKAGEN and its funds are under the supervision of the Finanstilsynet - the Norwegian Financial Supervisory Authority (FSA). The FSA is charged with the protection of unit holders and maintaining the integrity of financial markets and exercises rigorous control and regulation. Read more about fund regulation in Norway.
Long-term thinking approach
The individual funds cannot go bankrupt. In Norway a securities fund is a separate legal entity consisting of unit holders' deposits. Each unit holder owns a part of the securities fund equal to their share of the total issued fund units.
A management company may declare bankruptcy if it does not have sufficient assets to cover its contractual obligations. Since it started in 1993, the owners have always had a long-term thinking approach as opposed to a short-term focus on the next quarterly results.
The Act on Securities Funds' regulations regulates what would happen if a management company were to declare bankruptcy. In such a case the management company's authorisation to manage funds would be revoked. The home state regulator in Norway would intervene and, according to the Act on Securities Funds regulations, the funds would either be liquidated or transferred to another management company.
If the funds were liquidated, each client's units would be redeemed and the sum would be transferred to the client's bank account. If the funds were transferred to another management company, the funds would continue to exist and the clients would retain their units. The client may also at any time choose to redeem their units in the funds.
UCITS and European regulation
Norway is bound to implement EU legislation through its EEA agreement which means that Norwegian regulation of the financial services industry to a large degree hails from EU Directives and other EU regulations. Norway has enacted the UCITS Directive, and the funds that SKAGEN markets internationally comply with UCITS regulations.