In the wake of the mutual fund scandals involving market timing and late‐day trading, the Securities and Exchange Commission recently issued new investment company governance regulations. The widely debated new rules require most investment companies to ensure that that at least 75% of their directors ‐ and the chairman of the board ‐ be “independent.” The new rules also require most funds to adopt other governance practices, including annual self‐evaluations and meetings in executive session without the presence of fund management. In the adopting release, the SEC also provided guidance on how fund directors should fulfill their fiduciary duties to fund shareholders. The SEC adopted these rules in light of several well publicized enforcement proceedings and anticipation of action by Congress.
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