If mutual fund boards feel that something is not "fundamental," they can change it without seeking any shareholder input. So for Fidelity Investments, merging funds into less expensive ones is not considered fundamental, and the board is trying to pass it through without a vote, The Wall Street Journal reports.
This is nothing new. A 2002 Securities and Exchange Commission decision allowed for fund boards to merge funds without approval, and one year later, the Commission said fund boards could change sub-advisers without first asking the shareholders.
The reason for the rule adjustments was a bureacracy thing: the Commission was sick of watching rule exemption requests pass through its desk. But now, amid a scandal that has rocked much of the industry, investors might have a problem with more powerful boards and directors.
"With today's desires for sunshine in the industry, I'm not sure that will be well received now," said industry expert and consultant Geoff Bobroff.