SEC Sanctions Independent Trustees For Approving Mutual Fund Advisory Contract Without Sufficient Information

Underscoring the need for independent trustees to act vigilantly, a recent SEC consent order issued in an enforcement action imposed discipline on a mutual fund's independent trustees, its investment advisor, and the investment advisor's principal in connection with the trustees' failure to obtain sufficient information before approving the fund's advisory contract. Although the case dealt with the requirements imposed on boards of registered investment companies under Section 15(c) of the Investment Company Act, the case also may serve as a reminder to trustees, directors, general partners, and service providers of other investment vehicles that diligence may be required before taking or approving action affecting investors' interests.