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News December 6, 2004 Issue

Independent Chairs: Guidance to Come, Resistance Continues

Look for the Independent Directors Council, an offshoot of the ICI, to issue a report this month providing guidance to fund boards on implementing the new independent chairman provision. The report, which will be made publicly available, will address the responsibilities of the independent chair, as well as the factors board members should consider when selecting and compensating the chair. The report is being prepared by a task force of independent fund directors.

For its part, the Mutual Fund Directors Forum will be co-hosting a series of regional workshops for independent chairman, along with consulting firm Management Practice.

Thereís another independent chair-related report that bears watching. Per language inserted into a recent appropriations bill, Congress has tasked the SEC with preparing a report justifying the independent chair requirement. In particular, the SEC must analyze whether mutual funds with independent chairs "perform better, have lower expenses, or have better compliance records than mutual funds chaired by interested directors." The SEC must deliver the report to the Senate Appropriations Committee by May 1, 2005, and must act on the reportís recommendation by January 1, 2006. The appropriations bill is expected to be sent to the White House for signing next week, after the House passes a correcting resolution unrelated to the SEC appropriation or independent chair language.

In other independent chair news, the court date for the U.S. Chamber of Commerce v. SEC litigation has been set for April 15, 2004.