The U.S. Securities and Exchange Commission on July 11 dropped all charges against Pinnacle Advisors LLC's independent director and adviser officer defendants in the first case seeking to enforce the SEC's liquidity rule, which requires registered funds to manage liquidity risk. The impact of the case in the fund world continues to reverberate.

The case was particularly shocking because the SEC alleged that the independent directors recklessly failed in their oversight duties, notwithstanding the facts that the independent directors did not write, review or see the liquidity classifications that formed the basis for the charges; did not substantially assist the violation; and otherwise complied with their liquidity rule obligations.

Dianne Descoteaux, senior counsel at MFDF, has authored an article in Law360 that "aims to evaluate how the Pinnacle case underscores the value of director independence and conscientiousness, and how it can be applied broadly to help directors meet their general oversight responsibilities in a rapidly evolving fund industry." Read the full article here.