SEC proposes guidelines for directors overseeing mutual fund portfolio trading

Abstract

Purpose

This paper aims to provide an update on the mutual fund industry about new brokerage review responsibilities for directors of mutual funds.

Design/methodology/approach

The paper carefully reviews the SEC release proposing the Guidelines, including the appendices to the Release. The appendices set forth numerous questions that directors should ask when reviewing mutual fund brokerage and soft dollar arrangements. Advisers and brokers need to take immediate steps so that they are in a position to fully answer these questions.

Findings

As noted in the paper, the release is noteworthy because the SEC guidelines, if adopted, will require directors to probe mutual fund advisers for a remarkable amount of detail about brokerage and soft dollar arrangements. In some cases, the new responsibilities will bring directors close to managing certain aspects of these arrangements.

Practical Implications

It is clear that brokerage practices are a top priority of the SEC and that agency is now expecting far more involvement by directors in the process of placing trades for mutual funds and obtaining research through soft dollars.

Originality/value

The paper may serve as a road map for advisers when reviewing their brokerage compliance procedures and attorneys and consultants to mutual fund boards when setting agendas for board meetings.

Citation

Strench, B.L. (2008), "SEC proposes guidelines for directors overseeing mutual fund portfolio trading", Journal of Investment Compliance, Vol. 9 No. 4, pp. 27-32. https://doi.org/10.1108/15285810810922233