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Fund Democracy Loses Appeal

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  • Baker, John
    The U.S. Court of Appeals for the D.C. Circuit on Friday rejected an appeal by Fund Democracy, LLC from an order of the Securities and Exchange Commission
    Message 1 of 1 , Feb 4, 2002
      The U.S. Court of Appeals for the D.C. Circuit on Friday rejected an
      appeal by Fund Democracy, LLC from an order of the Securities and Exchange
      Commission denying Fund Democracy's request for a hearing on a multimanager
      exemptive order. Fund Democracy v. SEC, No. 01-1367 (D.C. Cir. Feb. 1,
      2002). The SEC in recent years has granted dozens of "multimanager" or
      "manager of managers" exemptive orders allowing a single investment manager
      in a mutual fund complex to select and retain subadvisers to the various
      funds in the complex. Fund Democracy last year submitted a hearing request
      in opposition to one of these exemptive orders, which normally are granted
      without a hearing by the SEC staff under authority delegated to them by the
      Commission.

      The D.C. Circuit ruled that Fund Democracy, a one-person business
      run by its principal, Mercer Bullard, did not have standing to bring an
      action challenging the SEC's granting of the order to Hillview Investment
      Trust II or its refusal to hold a hearing. The court stated that the only
      people who will be directly affected by the SEC's order granting Hillview's
      request for an exemption are those who have purchased shares in Hillview or
      are at least considering doing so. Fund Democracy presented no evidence
      that it or any of its "members" own, intend to purchase, or are even
      considering purchasing shares in Hillview. The court noted that the SEC may
      permit persons to intervene in the agency proceedings who would not have
      standing to seek judicial review of the agency action. Judge Edwards,
      concurring in the result, was of the opinion that Fund Democracy did have
      standing to challenge as arbitrary the SEC's denial of its request for a
      hearing, though he believed that the SEC was justified on these facts in
      denying the request for a hearing and agreed that Fund Democracy has no
      standing to seek judicial review of the merits of the SEC's order. The
      court's opinion is available online at

      http://pacer.cadc.uscourts.gov/common/opinions/200202/01-1367a.txt

      For my prior post on the SEC's ruling, see

      http://groups.yahoo.com/group/fundlaw/message/497


      John M. Baker <JBaker@...>
      Stradley, Ronon, Stevens & Young, LLP Http://www.stradley.com
      1220 19th Street, N.W., Suite 700, Washington, DC 20036
      (202) 419-8413 Fax (202) 822-0140
      FundLaw Listowner Http://groups.yahoo.com/group/fundlaw
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