winning a fight with the SEC over new rules by changing the venue? That is what seems to be happening reports the Wall Street Journal
. At issue are the new rules that require fund companies to have independent board chairs. Fidelity, which is owned by the Johnson family and which has long seated Edward Johnson as its fund board chair, has opposed the rule since it was proposed last year. Now, language requiring the SEC to analyze whether those rules are based on sound theory has been added onto a bill moving through the Senate.
The bill sets the SEC's budget for next year (it earmarks $913 million to the Commission) and is now subject to the reconciliation between the Senate and House versions. Both branches have reportedly agreed to include the language first introduced by Senator Judd Gregg
(R-New Hampshire) in the Senate version.
The paper points out that Fidelity is a large employer in Gregg's home state, but adds that Fidelity officials declined to comment for its story. Gregg himself told the paper that Fidelity has been supportive of the bill and that "We think they have made a pretty good case for their concerns." The paper adds that at least some other mutual fund firms support the language.
If passed and signed, the bill would require the SEC to "analyze whether mutual funds chaired by disinterested directors perform better, have lower expenses, or have better compliance records than mutual funds chaired by interested directors."
"We're just putting a flag out there that says the SEC needs to take a second look at this issue," Gregg told the paper, adding that the bill would not require the SEC to modify or drop the rules. "We think the rule has very little value from improving the consumer's position and has a negative impact probably on the management of a lot of the mutual funds," he is also quoted as saying.
The Commission would face a April 2005 deadline for its report and act upon its recommendations no later than January 2006.
Still, the addition to the bill faces at least one remaining stumbling block. Rep. Michael G. Oxley
(R-Ohio), chairman of the House Financial Services Committee, sent a letter this week to the House Appropriations Committee opposing the additional of the language introduced by Gregg.
Sean Hanna, Editor in Chief
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