Mutual fund directors, and the question of whether they should be independent, have become one of the most examined aspects of the mutual fund scandal. But some even question whether fund directors, or even the entire board, are necessary entities in the first place, The Wall Street Journal reports.

Not having to pay a director’s salaries would lower fees, and the boards themselves do not act as the watchdogs they’re supposed to act as, are two arguments from No-Load Fund Investor Editor Sheldon Jacobs in favor of doing away with boards altogether.

While scrapping fund boards has not even been broached by the Securities and Exchange Commission, the Journal reports that the idea has worked elsewhere. Mutual funds in Great Britain and Australia are board-less. In 1980, at the annual Investment Company Institute meeting, a securities attorney made a push for a similar structure in the United States. Other U.S. investment vehicles, like certain exchange traded funds, operate without boards and directors.

Fund fees in Great Britain are higher, though, so the "lower fee" argument does not seem feasible. Even the SEC’s Paul Roye said that the U.S. fees might be lower because before those fees are accepted, they have to be approved by a board. Without that board, maybe the fees would soar, regardless of the director’s salary.

Nonetheless, it does not seem likely that mutual fund directors and boards will be eschewed aside in favor of the Great Britain- or Australia-style system. What is interesting according to The Journal, is that the issue has barely been raised.


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.

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