Header graphic for print
The BD/IA Regulator Providing securities regulatory, enforcement and litigation trends for broker-dealers, investment advisers and investment funds

Category Archives: Fund Independent Directors

Subscribe to Fund Independent Directors RSS Feed

California Court Applies “Tracing” Requirement to ETF Shareholders Who Sue under Section 11

Posted in Fund Independent Directors, Fund Regulation

A California state court held that shareholders of exchange-traded funds (ETFs) have standing to sue under Section 11 of the Securities Act of 1933 (“1933 Act”) for an alleged prospectus misstatement only if they can trace their ETF shares back to shares that were originally sold pursuant to a materially false or misleading registration statement. … Read More

2017 Independent Counsel Roundtable

Posted in Events, Fund Independent Directors, Fund Regulation

Monday, July 24, 2017 Investment Company Institute 1401 H St. NW David Silver Conference Room Suite 1200 Washington, DC 20005 IDC and ICI will host the annual Independent Counsel Roundtable, an informal discussion on the issues most important to the independent director community. The following topics will be on the agenda—litigation, governance, data security, business… Read More

ICI Survey: Mutual Fund Independent Directors Are Getting Older and Wiser

Posted in Fund Independent Directors

Mutual fund directors are getting older and wiser as they oversee a growing amount of assets and number of funds, according to a governance study published by the Investment Company Institute on October 27, 2015. The ICI’s study, which tracks governance practices from 1994 to 2014, identified a number of trends that would not surprise… Read More

Best Practices for Independent Directors of Business Development Companies

Posted in Fund Independent Directors

As business development companies (BDCs) grow in popularity, the role of their independent directors grows in importance. Here we look at the increasingly important role that BDC independent directors play and how their responsibilities differ from the responsibilities of independent directors to traditional investment companies. To read the full alert, click here.

SEC Staff Urges Bond Fund Advisers to Reassess Risk Management in Light of Market Volatility

Posted in Fund Independent Directors, Fund Regulation

The SEC’s Division of Investment Management recommends that fixed income fund advisers take steps to assess portfolio risk in light of “potential market volatility” and review the adequacy of related prospectus disclosures. In particular, the staff suggests that fund advisers “consider taking” the following steps: Assess and stress-test liquidity during normal and stressed environments, taking… Read More

MFDF Updates Best Practices – Fund Directors Should Be Independent and Fully Informed

Posted in Fund Independent Directors

The Mutual Fund Directors Forum updated its best practices recommendations for mutual fund directors. The October 13 report, Practical Guidance for Mutual Fund Directors – Board Governance and Review of Investment Advisory Agreements, reflects legal developments affecting fund directors over the 10 years since the MFDF’s first report was released. The report affirms many widely… Read More

SEC’s Champ to Fund Directors: Let’s Work Together to Advance a Common Purpose

Posted in Fund Independent Directors

The Director of the SEC’s Division of Investment Management seeks a “successful collaboration” between fund directors and the SEC staff to further a common purpose: to protect investors. In remarks to the Independent Directors Council, Norm Champ said that “we already benefit from the work of independent directors,” and asked what the staff can do… Read More

White on Serving as Fund Director: Not for the Uninitiated or Faint of Heart

Posted in Enforcement, Fund Independent Directors, SEC Enforcement

SEC Chair Mary Jo White dismissed suggestions that the SEC’s recent focus on “gatekeepers,” including fund directors, may drive away qualified candidates “for fear of being second-guessed or blamed for every issue that arises.”  Let’s face it: with SEC enforcement personnel sniffing around fund boardrooms and suing fund directors, that thought has crossed our mind…. Read More

SEC Steps into Fund Boardroom Once Again; Charges Adviser with Misleading Board

Posted in Fund Independent Directors, Fund Regulation, Investment Adviser Regulation, SEC Enforcement

The SEC charged a registered investment adviser and its principal with misleading a mutual fund’s board about the adviser’s portfolio management trading capabilities.  The SEC said the adviser misled the board at two meetings when the board considered and approved the investment advisory contract between the fund and the adviser.  In addition, the SEC claimed… Read More

SEC Slaps Fund Directors for Violating Fair Valuation Responsibilities

Posted in Fund Independent Directors, Fund Regulation, SEC Enforcement

Eight former directors of five mutual funds recently settled SEC charges that they failed to satisfy their fair valuation obligations under the 1940 Act. No monetary penalties were assessed, but the former directors agreed to “cease and desist” from future violations (a relatively easy task, since the funds are no longer in operation). The SEC’s… Read More

Fund Trustees Sanctioned for Inadequate Disclosures and Failure to Follow Compliance Policies

Posted in Enforcement, Fund Independent Directors, SEC Enforcement

The SEC, it seems, is serious when they say that mutual fund trustees are “watchdogs” and “gatekeepers,” and they are prepared to hold board members responsible for acting that way. For the second time in less than six months, the SEC named fund board members in an enforcement action. This time, the focus is on disclosure… Read More

MMF Executives Sue Independent Trustees for Fraud and Waste of Corporate Assets

Posted in Fund Independent Directors, Private Litigation

In yet another interesting twist in the case of the money market fund that broke the buck, the principals of the fund’s investment adviser sued the funds’ independent trustees, claiming that they had a “substantial, if not controlling, role in almost all the conduct with which [the SEC] takes issue.” The complaint is good reading,… Read More

SEC Accuses Fund Directors of Breaching Their Valuation Duties

Posted in Enforcement, Fund Independent Directors, Fund Regulation

The SEC has sued the former members of the board of several closed-end and open-end registered investment companies. In short, the SEC alleges that the directors failed to properly fair value a majority of the funds’ holdings during an eight-month period in 2007. The complaint is fact specific and should provide fund boards with some insight… Read More