Ned Johnson, the chairman of Fidelity Investments, is taking a staunch stand against the Securities and Exchange Commissions proposal to make an independent chairman mandatory on all mutual fund boards, the Financial Times reports.
Obviously, Johnson, who chairs the boards of all 292 of Fidelitys mutual funds, takes the issue personally. His argument is, and has been for years, that a chairman who also invests in the fund will always act in the investors best interest, considering he or she is also an investor.
Fidelity Investor newsletter Editor Jim Lowell said this marks the first time the usually quiet Johnson has taken such a public stance, especially against the SEC. "It is uncharacteristically aggressive, unabashedly political, and overwhelmingly personal," Lowell said.
The mutual fund lobbyist group Investment Company Institute agrees with Johnson, thought it supports a separate SEC proposal, which would make it mandatory for at least 75% of fund board members to be independent.
But Johnson is not alone. Other fund company executives have been calling independent boards ineffective, Reuters reports. Putnam Investments Chairman John Hill recently said independent mutual fund boards comprised of mostly independent directors could not have stopped market-timing infractions at the company that recently led to a costly settlement with securities regulators.
Mutual fund providers are growing increasingly bolder in publicly criticizing proposed regulations requiring boards of directors to seat a majority of independent directors, Reuters reports. Fidelity led the charge in recent months to preserve its Johnsons dual roles as company chairman and head of its funds independent trustees.
Statements by Fidelity, Putnam and other large mutual fund providers downplaying the need for board reforms suggest that the force of a recent settlement calling for the resignation of eight trustees at Bank of America s Nations Funds is nearly spent, according to Reuters.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.