Mutual fund companies may lose the first round in fighting the new independent chairman rule Wednesday, when the Securities and Exchange Commission is expected to vote on the new measure requiring directors who are unaffiliated with management to take the helm of mutual fund boards. If so, investment powerhouses like Fidelity Investments and The Vanguard Group will have lost a major battle with the SEC, CBSMarketWatch.com reports.
The new SEC proposal aims to increase accountability by populating three-quarters of each mutual fund board, including the chairman, with independent directors. But fund companies have not relaxed their efforts in lobbying to overturn the final vote.
A number of mutual fund industry leaders, including Edward Johnson, chairman and CEO of Fidelity Investments, who is also chairman of the company's board of directors, fought the proposal tooth and nail. The outcome of the battle means that Johnson and other fund company executives who maintain dual roles as executives and board chairmen will have to relinquish one of their titles.
News of the new SEC rule was cast in a more favorable light by Mutual Fund Directors Forum President Allan Mostoff, who praised the decision as a step toward increased corporate accountability. Paul Haaga, chairman of the Investment Company Institute, the mutual fund industry trade group, praised the measure in lukewarm terms by saying fund boards should seat the most qualified trustees, including independent directors.
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.