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News February 21, 2005 Issue

Roye on Gifts

Speaking at last week’s Mutual Fund Directors Forum, SEC Division of Investment Management director Paul Roye urged fund independent directors to review the fund adviser’s gift policy.

"There is no doubt that the receipt of lavish gifts and entertainment can influence fund personnel’s actions, and even tempt fund personnel to take actions that may not be in the best interest of fund investors," said Roye. "Consequently, it is essential for advisers — and fund directors — to consider whether there are appropriate controls in place addressing the receipt of gifts and entertainment."

Roye described the code of ethics as "an appropriate place" to outline a firm’s philosophy regarding the receipt of gifts and entertainment, as well as to "establish the controls the firm puts in place to limit the corrupting influence" of gifts.