From the Editor...
Earlier this month, the Securities and Exchange Commission proposed a package of rulemakings and interpretations to address broker-dealers' and investment advisers' potential conflicts of interest when dispensing investment advice. In the package are Regulation Best Interest and short-form disclosure document Form CRS, among other proposals. The SEC's move was anticipated, and if finalized, the rules would touch many parts of the mutual fund industry. That, in itself, makes this something mutual fund boards should follow, even though it's not necessarily something on which they have to act. To help fund directors make sure they understand the SEC's proposals and ensure they know how advisers might be affected by them, we put together a list of 10 Things...Boards should ask about SEC conflict rules. The list—compiled with input from industry professionals—is a great way to get conversations started, so check it out.
We write a lot about excessive fee cases that allege violations of Section 36(b) of the Investment Company Act of 1940, but that's not the only type of shareholder action that can affect the fund board of directors. Shareholder derivative actions mostly start with a demand on the board, and it's important for directors to have a plan in place for dealing with such a demand should it be made. Does your board have such a plan?
As always seems to be the case, people continue to move in, out and around the fund governance sector. Impact Shares has filled out its board in anticipation of the launch of its exchange-traded funds line, First American Funds has brought back a former director to fill an empty seat, Morningstar Investment Management has put together the board that will oversee its soon-to-be-launched funds, and long-time SEC veteran Douglas Scheidt is retiring from the Division of Investment Management.
The board overseeing PGIM Funds has gone through its own share of changes in recent years, and independent Chairman Keith Hartstein spoke with us about how he and the board have handled them—and continue to do so. He provided insight on the generational shift that has occurred in the Pru boardroom, how directors prepared to oversee PGIM's new ETFs, and which processes and procedures he's put in place and carried on from his predecessor Richard Redeker.
Finally, we've got a great opinion piece from Ropes & Gray's Paulita Pike on the D&O insurance market. Give it a read.
Hillary Jackson, founding editor