Law and regulation

Fidelity Investments of Boston is likely to be adding a new member to its funds' boards of directors early next year.

A consortium of 15 mutual fund and asset management firms has agreed to boycott the purchase of securities of Mitsubishi International of Tokyo. The group of investment advisers followed the recommendation of the International Fund for Animal Welfare, an advocacy group based in Yarmouth Port, Mass. The fund urged the actions against Mitsubishi because of a proposed salt production plant the company plans to build in Baja California, Mexico that the fund says will harm wildlife.

Closed-end fund activist Ronald Olin is asking shareholders of the Portugal Fund to elect Olin's own slate of directors in a vote on opening the closed-end fund. Olin also promises to submit a proposal at the shareholder meeting scheduled for Oct. 15 recommending that, if the Portugal Fund is opened, a proposed 1.5-percent redemption fee be waived.

The 59 Wall Street Funds, the small fund group of Brown Brothers Harriman & Co. of New York, appears to be the first in the industry to make changes in its requirements for directors as a result of a special industry report issued in June.

Closed-end fund activist Ronald Olin is having the misfortune of getting what he wished for in a unique closed-end fund fight.

The $56 million USLife Income Fund, a closed-end fund managed by Variable Annuity Life Insurance Co. (VALIC), a Houston, Tex.-based unit of American General Annuity Insurance Co., may soon be facing the fight of its 27-year life.

Shareholders suffered another in a string of losses in cases they have brought challenging the independence of mutual fund directors.

Shareholders of four Fidelity funds are being asked to reconsider approval of PricewaterhouseCoopers of New York as the funds' independent auditor in light of new revelations that raise questions about the independence of the accounting firm in its role as auditor to the funds.

WASHINGTON - What is becoming a standard business practice in the corporate world - paying independent corporate directors in stock - may become more common in the mutual fund industry.

While some mutual fund managers believe market timers frequently run amok, one group of registered investment advisors who call themselves timers are willingly setting their own limits on moving assets in and out of mutual funds.

Shareholders of the ASM Index 30 Fund are due to vote in the next few weeks on a permanent replacement for an adviser who was ousted because the fund's board believed the adviser could not pay expenses and was in danger of being sued for alleged misappropriation of funds.

NEW YORK - Mutual fund companies do not need to worry much about how well their directors are paid or whether they sit on multiple fund boards, said lawyers on a panel exploring "Litigation, Enforcement & Inspections" at a conference sponsored by the Practising Law Institute of New York recently.

Compensation for independent mutual fund directors increased an average of nine percent last year with median pay at larger fund complexes at $66,000, according to a survey by Management Practice, a fund consulting firm in New York.

ICI Mutual Insurance Company, a leading provider of liability insurance for mutual fund directors, has revised its insurance coverage in an effort to provide independent directors with more protection in disputes with fund advisers.

Washington - The mutual fund industry needs to do more to hire minorities, according to an independent mutual fund director. Willie D. Davis, an independent director for the Strong Funds for the past five years, told mutual fund executives at a conference here that the issue of racial diversity is starting to appear "on the screen" for the mutual fund industry. Davis, who is African-American, said that in hiring and on "social issues," the mutual fund industry has a "responsibility to give something back."

Mutual fund directors, lawyers and academics will meet in Washington tomorrow and Wednesday to examine the state of mutual fund governance and consider possible changes.

The role of independent directors of mutual funds has been the subject of considerable debate recently and is the topic of an SEC roundtable this week in Washington. (see box page 36.) MFMN free-lance reporter Lori Pizzani drew together several industry leaders to discuss aspects of the issue.

The SEC has proposed changes which it says will simplify the form which mutual funds use to wind up business. The proposed amendments to Rule 8f-1 under the Investment Company Act and Form N-8F simplify and reorganize the form which funds use to de-register, the SEC said in a statement late last month. The industry had until Feb. 5 to comment on the proposal.

Donald Yacktman looked like the winner last week in his proxy fight with the independent directors who monitor the two mutual funds that bear Yacktman's name.