Legislation that would require funds to disclose more information about fees and other costs is back before Congress. Hawaiian Senator Daniel Akaka reintroduced the bill this week.
Akaka's bill -- The Mutual Fund Transparency Act of 2005 -- is similar to legislation submitted the past two years. The initial version of the bill, which was submitted just months before Eliot Spitzer went public with his fund trading allegations, was defeated with the help of lobbying by fund industry leaders.
At the center of the bill is a formal requirement that fund firm board seats be filled by at least three quarters independent directors.
"It will require that mutual fund boards have independent chairmen and that 75 percent of their directors be independent," Akaka said. "This legislation strengthens the definition of who is considered an independent director and requires independent directors to be approved by shareholders. These steps are necessary to strengthen the ability of mutual fund boards to detect and prevent abuses of investor trust."
The SEC has already required the increase in independent directors on fund boards and that the board chair be independent.
Akaka praised those regulations, calling them "impressive," but added that he believes his bill will "further strengthen the independence of boards, make investors more aware of the true costs of their mutual funds, and prevent several key reforms from being rolled back."
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