The battle to overturn newly enacted regulations calling for independent chairmen to head mutual fund boards heated up again Wednesday after the U.S. Chamber of Commerce filed a biting legal brief accusing the Securities and Exchange Commission of admitting that some independent directors are ineffective, Dow Jones Newswires reports.
The chamber said that the SEC has admitted that many independent directors are "asleep." In its new brief, the chamber said: "It does not ordinarily follow that when personnel are 'asleep' or indifferent, the solution is having more of them."
The chamber also said that Congress never intended for all fund companies to have independent chairman, only those that rely on certain exemptions from fund rules. However, the SEC purposely wrote the independent chairman rule to apply to fund companies that use a type of exemption that can be found virtually at all fund complexes, thereby warping Congress's original intent, the chamber charged.
The chamber sued the SEC last year over a new regulation calling for at least 75% of a fund's directors, including the board chairman, to be independent of management. At that time, the chamber's primary argument was that the SEC was overstepping its bounds, as set forth in the '40 Act. SEC officials moved to have the lawsuit thrown out on grounds that even though the Chamber has mutual fund investments of its own and at least 30 members that are mutual fund companies, it still not made an adequate case that it has a stake in the matter.