A week after the SEC simply reaffirmed the fund independence rule, the United States Chamber of Commerce again took issue with the rule in legal papers filed Thursday with the US Court of Appeals for the District of Columbia Circuit (See Appeals Judges Consider Independent Fund Director Rule Challenge ). The Chamber asserted in its legal papers that the SEC didn’t give proper consideration to the court’s June 21 order that the SEC take another look at the matter, according to news reports. The rule, which the SEC approved on a 3-2 vote in 2004 and again on June 29, requires mutual fund board chairmen and 75% of board directors to be independent of the fund’s management (See SEC to Add More Detail to Independent Fund Director Rule ).
“The SEC didn’t meet their legal requirements the first time around and today’s effort is no different,” said Thomas Donohue, Chamber President and CEO, in a statement . “It’s outrageous that a regulatory agency would deliberately ignore the orders of a U.S. Court of Appeals and disregard calls for a reasoned rulemaking process.”
Donohue blasted the SEC for the speed of its handling of the case in light of the appeals ruling. “After a seven-day secret process, the SEC has recklessly re-adopted its flawed rule,” Donohue charged in the Chamber statement. “This attempt to circumvent our legal and regulatory process will not stand up in court.”
The Chamber also challenged a new SEC report presenting estimates showing that t he costs associated with the mutual fund directors rule would be minimal. “There is no reason to rely on consultant guesstimates,” said Donohue. “Real data exists from companies which have implemented changes in their boards. An honest rulemaking process would seek the best information possible, not the quickest.”
For its part, the SEC has only put out a brief mention of its reapproval of the fund independence rule. “The Commission considered further its adoption of amendments to rules under the Investment Company Act of 1940. Acting in response to a decision by the Court of Appeals for the District of Columbia Circuit (Chamber of Commerce v. SEC) remanding two issues raised by the rulemaking, the Commission voted not to modify the amendments,” regulators wrote in their announcement .