SEC Threatens Independent Directors with Enforcement Actions over Fund Fees
The Mutual Fund Directors Forum has reported that the SEC will closely examine mutual fund fees and intends to bring enforcement actions against independent directors. Staff of the MFDF met with SEC staff about the Division of Enforcement’s new Asset Management Unit. The MFDF reports that “the SEC is looking closely at the activities of both funds and independent directors and that it plans to bring enforcement actions when appropriate.” The SEC is closely examining the 15(c) process by developing “a set of analytic tool to permit them to identify outlier fees” and plans to use the results to institute examinations and enforcement investigations. Investigations will include an analysis of whether independent directors “are appropriately vetting fee arrangements.”
OUR TAKE: Apparently, the SEC does not agree with the Jones v. Harris Associates decision which makes it very difficult for private plaintiffs to bring actions against independent directors. We are surprised that the SEC has threatened enforcement actions against independent directors. The SEC usually views independent directors as an ally, not an enemy.