Some mutual fund directors are chronically absent from fund board meetings, according to a top SEC official.

Fund compliance executives should work with mutual fund directors to make sure the fund governance structure is working effectively, said Cindy Fornelli, senior advisor to Paul Roye, director of the SEC's division of investment management. The SEC has found that some directors "frequently" miss board meetings, Fornelli said.

Fornelli said other problems concerning directors that the SEC has found include: directors who are classified as independent in fact are not independent; fund boards are not approving contracts that they are required to approve; and directors are delegating responsibilities to fund advisers that they are not allowed to delegate under federal securities laws.

"You should make directors aware of the importance of, and the need for, strong compliance, and at some point you will need to educate them regarding your compliance systems and procedures," Fornelli said.

Fornelli spoke at the Investment Company Institute's Mutual Fund Training Conference earlier this month in Washington, D.C. The SEC published a copy of Fornelli's speech on the agency's website. Fornelli did not identify particular fund directors or companies in her remarks.

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