BOSTON - The SEC's goal of providing final rules regarding director independence by this summer could be in jeopardy.

Several controversial topics and a high volume of comments responding to the SEC's original proposals could push adoption of a final rule to September or even later, said C. Hunter Jones, assistant director of the SEC's division of investment management.

Jones spoke about the proposed directors' rules at The National Investment Company Service Association's annual general membership meeting here May 11.

The SEC proposed rules designed to strengthen the independence of fund directors in October 1999. Paul Roye, director of the division of investment management, said in March that the agency hoped to have a final version of the rules out this summer.

A variety of factors are making that target hard to hit, Jones said. The SEC is in the midst of drafting the final version of regulations regarding investor privacy. In April, the agency proposed substantial revisions to the form that all investment advisers with more than $25 million in assets under management must file with the SEC, the Form ADV. And the SEC is holding a forum on investment adviser issues May 23. All of those factors are occupying the SEC staff, Jones said.

The SEC also received more than 160 comments in reaction to its proposed rules, Jones said. Assessing those comments and considering modifications to the original proposal also has been time consuming.

The directors' proposal drew varied reactions at the conference. Industry lawyers and directors have criticized aspects of the rule proposals for months. But, at one least one consultant found reasons to support the proposals.

The SEC's proposals offer a benefit to the industry because if adopted, they will improve public perception of directors' independence, said Meyrick Payne, a senior partner at Management Practice of New York, a consulting firm for fund directors. That perception will have increasing importance as the mutual fund industry, which now has roughly $7 trillion in assets, evolves from investing to savings, Payne said.

"The next $7 trillion is going to come mostly from savings for retirement," Payne said of the industry. "I'm saying the price of that is perceived effective governance."

The SEC proposal that drew the most reaction at the conference was one that would require lawyers who work for independent fund directors be independent of the fund adviser. Lawyers already avoid or disclose conflicts that erode their independence, lawyers at the conference said.

Also at the conference, NICSA members elected four new members of the organization's board of directors. They include William J. Galvin, Jr., senior vice president of Invesco Funds of Denver; Gary L. Moody, partner of Deloitte & Touche LLP of New York; Christopher Wilson, president and CEO of Nvest Services Co., of Boston; and James L. Greenawalt, managing director of Scudder Kemper Investments of New York.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.