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What Independent Directors Should 'Request' of Mutual Fund Advisers

John A. Haslem

University of Maryland - Robert H. Smith School of Business

August 5, 2010

The background to this study is the failure of mutual fund independent directors to fulfill their obligations as “shareholder watchdogs,” as defined in the Investment Company Act of 1940. Normative transparency of information is fund adviser disclosure proactively “requested” by independent directors to enable their fiduciary roles as “shareholder watchdogs.”

U.S. District Judge Feess’s opinion in a mutual fund case of excessive fees provides a candid assessment of independent director performance. He supports the view that directors are likely to “go along” with mutual fund adviser plans and actions. This view suggests directors are unlikely to “request” normative information required to serve the “primary interests” of fund shareholders.

The judge’s opinion includes numerous revealing insights on the performance [poor] of independent directors. These revelations and other relevant issues in the opinion provide case-based support for independent directors to “request” fund advisers to provide normative transparency of information for their analysis.

To achieve normative transparency of information Independent directors and advisers of major funds known for shareholder stewardship must strongly, vigorously, and proactively work together to gain approval in Congress and/or the SEC. The outlook is not bright, but the goal is worthy of the challenge.

Number of Pages in PDF File: 23

Keywords: mutual funds, adviser practices, normative transparency of information, independent directors, proactively requested normative information, agency, legal opinion, list of normative information, independent director performance, directors go along,' regulatory change

JEL Classification: G2, G23, G28

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Date posted: November 18, 2008 ; Last revised: October 8, 2012

Suggested Citation

Haslem, John A., What Independent Directors Should 'Request' of Mutual Fund Advisers (August 5, 2010). Available at SSRN: https://ssrn.com/abstract=1302373 or http://dx.doi.org/10.2139/ssrn.1302373

Contact Information

John A. Haslem (Contact Author)
University of Maryland - Robert H. Smith School of Business ( email )
College Park, MD 20742
United States
202-387 2025 (Phone)
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