Loading ...
Sorry, an error occurred while loading the content.

SEC Staff Report on Independent Chair Requirement

Expand Messages
  • Baker, John
    The Securities and Exchange Commission has issued a staff report justifying the pending requirement in its fund governance rules that the chair of the board of
    Message 1 of 1 , May 5 4:57 PM
    • 0 Attachment
      The Securities and Exchange Commission has issued a staff report justifying the pending requirement in its fund governance rules that the chair of the board of directors of a mutual fund be an independent director. Exemptive Rule Amendments of 2004: The Independent Chair Condition (Apr. 2005). The report was submitted to the Senate Appropriations Committee in response to the Consolidated Appropriations Act, 2005, which required the report to justify the independent chair requirement and to analyze whether mutual funds chaired by disinterested directors perform better, have lower expenses, or have better compliance records than mutual funds chaired by interested directors. The Act also requires the SEC to act upon the report's recommendations by January 1, 2006.

      Predictably, the report does not recommend any changes to the rules. Instead, it recommends that the Commission and staff continue to monitor how the presence of an independent chair on the board changes the independence and effectiveness of the board. The report states that there is no statistically significant relation between chair type and excess returns; it does find that independent-chaired fund families charge lower fees than management-chaired families, but the difference in mean expenses is not statistically significant in all cases. The report relies primarily on anticipated improvements in compliance to justify the rule changes. The report is available online at

      http://www.sec.gov/news/studies/indchair.pdf


      In an unusual step, Commissioners Atkins and Glassman wrote separately to key members of the Senate Appropriations Committee, saying that the report fails to respond adequately to the questions posed in the Act and offers no evidence to support its premises. They also complained that they were not given at any point in the process an opportunity to provide constructive input on what they would consider a responsive report. Their letter is available at

      http://www.sec.gov/news/speech/spch050205cagpsa.htm


      John M. Baker <JMB@...>
      Stradley, Ronon, Stevens & Young, LLP http://www.stradley.com
      1220 19th Street, N.W., Suite 600, Washington, DC 20036
      (202) 419-8413 Fax (202) 822-0140
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
    Your message has been successfully submitted and would be delivered to recipients shortly.