The rule requires chairmen of mutual fund boards and 75% of board’s directors to have no ties to the companies that manage the funds (See SEC to Consider Independent Director, Broker Rule Changes ). Implementation of the rule has been delayed due to legal challenges by the US Chamber of Commerce (See Court Delays Implementation of Independent Fund Director Rule ).
The Mutual Fund Directors Forum surveyed its members this month to find out how many boards have already complied with the new rule and how costly it has been, according to the Dow Jones Newswires. Respondents represented 45 fund companies.
Dow Jones reports that 80% of respondents said their funds have an independent chairman, and, according to a Forum press release , 31% reported no additional costs as a result of making the change. Most of those who reported additional costs said the costs were less than $50,000, Dow Jones reported. The Forum press release said the most common additional cost was for additional compensation to the chairman.
More than 90% of respondents said their boards meet the 75% independent director requirement. Some reported costs for the change less than $50,000, and others reported costs up to $150,000. The higher costs were mainly due to proxy solicitations to shareholders seeking approval of the new directors, Dow Jones reports.
The Mutual Fund Directors Forum is made up of independent directors at 60 fund companies. In July 2004, in a report to the SEC, the Forum recommended all mutual fund companies adopt the independent fund director rule changes as best practices. The forum report is here .