From the Editor...

April 12, 2022

By Hillary Jackson

From the Editor...


When William Birdthistle took the top spot at the SEC's Division of Investment Management late last year, he was a bit of an unknown quantity, having spent his career in academia. Birdthistle had been a professor at Chicago-Kent College of Law for 15 years when he was tapped in December to run the IM Division. He'd been quoted in the press on issues related to the mutual fund industry and fund boards, and he'd acted as an expert witness for plaintiffs in cases against industry firms, so there was a bit a wariness among fund professionals who were familiar with him. Until the end of March, Birdthistle hadn't directly addressed the fund industry and when he did, it made some uneasy and unhappy.


In a speech at the ICI's 2022 Investment Management Conference on March 28, Birdthistle questioned whether mutual funds are honoring their fiduciary duties under Section 36(b) of the Investment Company Act of 1940 given that no plaintiff has ever been successful in suing the industry for violating the rule—and he reminded the audience that the SEC itself has the ability to bring Section 36(b) actions.


"I firmly disagree with Director Birdthistle's suggestion that advisers are not honoring their fiduciary duties regarding compensation," an industry litigator told me after the speech. "Courts have repeatedly found just the opposite, in several cases following extensive trial testimony. The courts' findings usually focus on the evidence of very robust board processes. The industry plainly takes very seriously its obligations to ensure appropriate fees, and the consistent results in 36(b) litigation reaffirms that." That litigator wasn't the only one to take umbrage with Birdthistle's comments; for more insight, check out our story.  


In other news, we report on Management Practice Inc.'s latest figures on fund firm profitability and, separately, examine how fund boards could—and should—be educating themselves and preparing for the possibility of advisers' allowing fund shareholders a direct say in voting their proxies. Our latest 10 Things takes a broad look at the geopolitical climate and highlights what boards should be thinking about and focusing on at the moment, and our newest Viewpoints is an in-depth look at the new derivatives rule penned by a group of Stradley Ronon lawyers—including former IM Division Director David Grim.


For our subscribers only, we've also published a 10in10 ebook containing each of the articles written exclusively for FBV by Buddy Donohue and Proskauer's Kim Kaufman. It's a great resource to have on hand, as it covers the 10 most significant regulatory developments in the 10-year period between 2010 and 2020. 


Also, don't miss our latest FBV Monthly ebook, which includes all the stories we published in March—another great resource, only for FBV readers. 


For now,


Hillary Jackson, founding editor



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