From the Editor...

April 17, 2017

By Hillary Jackson

From the Editor...


While the mutual fund industry is feeling good about recent outcomes in the courts of lawsuits brought under Section 36(b) of the '40 Act, developments in the many cases still progressing through the court system keep on coming. In the meantime, boards are getting on with the everyday business of fulfilling their fiduciary responsibilities—including ensuring they have enough directors and the right leadership in the boardroom, dealing with regulatory requirements, and thinking ahead about what challenges might be next for them and the fund industry in general. 


In the Calamos case, an Illinois judge is considering a motion to compel the production of fund board material held back by the defendant during discovery under claims of attorney-client privilege. The motion is modeled on one that was successful in a case against PIMCO, and a ruling is expected any day. Chill v. Calamos Advisors is being heard in the Southern District of New York, but this motion was filed in the Northern District of Illinois because of the location of the board. Judge John Lee is presiding.


Meanwhile, an excessive fees case against T. Rowe Price Associates will proceed after a Maryland judge denied the Baltimore firm's motion to dismiss, and—as expected—the plaintiffs in a case won by Hartford Investment Financial Services in February have filed an appeal. We continue to follow developments in these important cases, which question fund boards' procedures and judgement with regard to the fees advisers charge.


In the PIMCO boardroom, there have been a number of changes in the past several years, and it looks like the current board may be the final product of an overhaul of fund governance that started in the wake of the high-profile departures of Mohamed El-Erian and Bill Gross. There's a new lead independent director at the helm, and another new independent director in place—and the board now looks almost nothing like it did just a few years ago. It's been a fascinating process to observe.


On the regulatory front, the fund industry is at the start of a nearly two-year process of becoming compliant with the SEC's new liquidity risk management rule, and for boards that means making sure they understand the complex regulation and are getting regular updates on progress. Time flies, so now's the time to work out a schedule and get busy


A little less pressing but still important for boards to have on their radar is the potential impacts of tax reforms that could come down from President Trump. It's unclear when Trump will start work on his promised reforms, but many in the industry—and beyond—expect it to happen eventually. Jay Laurila of Cohen & Co. offers some advice on getting ready.


We're looking forward to seeing many of you later this week at the Mutual Fund Directors Forum 2017 Policy Conference. The agenda looks good, and it's always a great get-together. Safe travels to those coming in from a distance.


For now,


Hillary Jackson, founding editor



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