SEC's New Rule Change May Help Bolster Directors
Wall Street Journal Online (09/05/00) Vol. 28, No. 15 p.6; Burns, Judith

The Securities and Exchange Commission (SEC) is creating new rules that could strengthen the independence of mutual-fund directors. The proposed rules would require directors to be independent and force them to disclose whether they sit on any boards of funds in which they have money invested. The directors' privacy will be protected, with their investments being listed revealed in a dollar range, not in a precise figure. Another change by the SEC has garnered some serious criticism, as it would require independent directors to outsource legal counsel. Critics argue that the proposed legal-advice provision would be too costly to small mutual funds that do not have a large shareholder base to spread around the expense of outside counsel. In response to this criticism, Paul Royce, director of the SEC's investment management division, said that the rule will not require directors to hire their own attorneys, but when they seek legal advice, they must outsource it. This will give them "independent, objective, unbiased advice," to protect the shareholders' interests.

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