From the Editor...

December 2, 2019

By Hillary Jackson

From the Editor...


The mutual fund markets have been waiting a long time to see what the Securities and Exchange Commission would do to regulate open-, closed-, and exchange-traded funds' use of derivatives. They got a glimpse of where the SEC was headed back in 2015 when the regulator released a draft rule and took public comment, but then the White House changed hands and then-SEC Chair Mary Jo White stepped down in early 2017, and the proposed rule was put way on the back burner. Jay Clayton has been at the helm of the SEC for some time now, and there have been whisperings of late that a new rule on the use of derivatives was in the works. No need to whisper anymore; the SEC proposed an updated rule last week and is once again asking for pubic comment.


At least at first glance, the market seems to like this version better than the one from four years ago, particularly when it comes to the treatment and expectations of the boards overseeing derivatives-using funds. Full analysis is yet to come, once market participants digest the latest draft rule, but it looks like new regulation could be approved in 2020 sometime. 


The SEC's Office of Compliance Inspections and Examinations also has been busy, having released a risk alert that details compliance deficiencies it has found in the past couple years—including several related to boards' contract renewal processes. Fund governance lawyers told us that the deficiencies aren't likely to be widespread, but said OCIE calling attention to them should spur boards to review their own procedures and processes. "The risk alert is essentially a gut check," one lawyer underscored.


The process of bringing a new director into the boardroom can be overwhelming and time-consuming. We spoke to some independent board chairs about what they've come to expect from those new recruits from the start—in some cases, before they even start occupying their space around the table. Have a look at our latest 10 Things... and let us know if there's a topic or issue you'd like to see covered going forward. We're always open to new ideas and suggestions!


Finally, our latest Viewpoints is from Buddy Donohue, an industry veteran who has worked in private practice as a lawyer and as in-house counsel, served two stints at the SEC, is an independent fund director, and is a regular on the speaking circuit (among other things). He shared with us some observations he's made about the fund industry and how it's grown and changed during his decades in the business. It's a great read.


We here at FBV hope you had a lovely, relaxing Thanksgiving weekend and wish you all the best for the holiday season, which is now upon us in full force!


For now,


Hillary Jackson, founding editor



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