Regulation

The mutual fund industry is rallying to support a Maryland law that says mutual fund directors do not lose their independence because they get paid for serving on several fund boards in the same mutual fund complex.

The SEC last week won a key case in its efforts to discourage registered representatives from selling class B shares of mutual funds when cheaper A shares are available.

The Investment Company Institute has announced its support for an SEC proposal that would allow joint liability insurance coverage to be purchased on behalf of a fund adviser, its officers and its fund directors.

The mutual fund world can expect to hear and read a lot more in the next few weeks about the independence of mutual fund directors, thanks to several events.

Mutual fund investors are better served by following a "buy and hold" investment strategy rather than moving in and out of top performing funds, according to the SEC.

After a string of successes in the courtroom through most of last year, the mutual fund industry suffered a setback recently in a federal class action lawsuit which contends that directors lost their independence by earning high pay for serving on multiple mutual fund boards.

Despite heightened awareness within the fund industry and increased scrutiny by the SEC of fund trustee independence, three newly-registered funds have, in recent months, placed individuals whose independence might be questioned, on their boards.

The Investment Company Institute has recommended the SEC tweak proposed rules which would enable fund companies to send only one copy of a proxy statement to a household whose members own the same fund in more than one account.

A class action suit against Dreyfus Corporation of New York will go forward in U.S. District Court in New York. The court dismissed five of eight claims against Dreyfus on Jan. 5. But, the judge allowed three claims to go forward. The remaining claims allege portfolio manager misconduct.

SEC Chairman Arthur Levitt is scheduled to give the keynote address next month at a special conference for independent mutual fund directors in Washington, D.C.