The Securities and Exchange Commission is urging a federal appeals court to dismiss a lawsuit brought by the U.S. Chamber of Commerce that targets a controversial new SEC rule for independent chairs of mutual funds.
Last spring, on the heels of the late-trading and marketing-timing scandal, the SEC ruled that independent chairs must comprise 75% of a mutual fund's board of directors. Board chairman must also be independent of the fund's daily management, the rule said. Since landmark governance was passed in 1940, just 40% of a fund's board has been required to be independent.
Charging that the SEC failed to consider pubic comment, ignored issues of cost and failed to consider evidence that an independent chair might be harmful, the Chamber of Commerce filed its lawsuit against the SEC in September. Arguments are scheduled to begin in Washington on April 15.
But now the SEC has filed a brief with the court arguing that the Chamber has not provided evidence that its membership, which includes 30 fund advisors, would be harmed by the new rule.