No one yet knows exactly how Securities and Exchange Commission Rule 38a-1 affecting mutual fund compliance will be enforced in years to come. The SEC is bound to offer clarification and guidance as time goes on, but funds must take steps now to meet requirements and make compliance a pervasive aspect of their management and board culture.

A good deal of the responsibility for compliance falls to mutual fund boards, which will be under scrutiny from the SEC's office of compliance, inspections and examinations. Rule 38a-1 requires funds to designate a chief compliance officer (CCO) to manage the daily compliance responsibilities and report to the board. Boards are likely to find they cannot delegate these duties completely, however. The SEC will expect them to be more actively involved in supervising a wide range of issues, including market timing, late-day trading and fair valuation, to name a few.

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