SEC Chairman William Donaldson asked the Mutual Fund Directors Forum to provide input on fund directors duties last November. Approximately eight months later, his request was answered with a 58-page report from the MFDF.

The MFDF intends for the report, titled Best Practices and Practical Guidance for Mutual Fund Directors, to serve as only as a guide for directors.

Although some of the report's recommendations are covered by the SEC's latest rule on fund company governance requiring an independent fund board chairman and a 75 percent majority of independent directors, others recommendations are not.

The MFDF addresses the controversial topic of director compensation head-on, suggesting that only directors should determine their own compensation. Also on the topic of directors themselves, the group suggests no specific retirement age or mandatory re-election period. Fund directors should conduct a self-evaluation of their performance annually, the directors recommend.

On the topic of soft dollars, the group recommends that best execution paired with transparency of costs and services should guide directors in overseeing securities transactions.

A brokerage's sales of a mutual fund and soft dollar arrangements should not be a consideration in directing trades to a broker-dealer, the report reommends. Revenue sharing arrangements should also be fully disclosed to the board and considered along with contract renewals.

Donaldson stated on Thursday in response to the report: "[the report] complements the Commission’s recent rulemaking initiative to enhance the fund governance framework and represents an independent director-led effort to provide meaningful guidance to fund directors. I therefore encourage all fund directors to review and consider carefully the Report’s recommendations." 

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