Because of the added costs that would be tacked onto mutual funds, a rule mandating independent board chairmen is a bad idea, the U.S. Chamber of Commerce said Thursday, The Wall Street Journal reports.
In fact, the Chamber went a step further, suing the Securities and Exchange Commission over the rule on Sept. 2, filing the case with the United States District Court for the District of Columbia. And now it has filed papers in the U.S. Court of Appeals D.C. Circuit. The Chamber contends that the SEC does not have the authority to make rules for mutual funds.
- In July, the SEC voted 3-2 in favor of 75% mutual fund board independence, with an independent director. The reason for the SECs new rule was to reduce the possibility of conflicts of interest on fund boards, which are supposed to protect investors best interests.
While the new rule does not take effect until 2006, the costs are already "imposing immediate and irretrievable costs," the Chamber said. The costs of searching for those independent chairmen, the Chamber said, are already taking their toll.