SEC Staff Eases Fund Director Burdens

The Securities and Exchange Commission's Division of Investment Management has issued a no-action letter confirming that the Division's Staff would not object if fund boards cease to make quarterly independent compliance findings under Rules 17a-7, 10f-3 and 17e-1, in light of the compliance rule framework required by Rule 38a-1 and the important and active role of a chief compliance officer reporting directly to the board.

SEC Staff Eases Fund Director Burdens

For decades, mutual fund directors have turned to quarterly reports on affiliated cross trades, participation in affiliated underwritings and affiliated brokerage; the reports themselves state that the trades are in compliance with the applicable rule or the chief compliance officer adds remarks to that effect. Then directors are asked to make their own findings that the transactions comply with the law.