From the Editor...

February 26, 2018

By Hillary Jackson

From the Editor...


Mutual fund boards have been granted a six-month reprieve on approving liquidity risk management programs, though the programs themselves—minus the bucketing requirements—and the board-approved program administrator still need to be in place by the original deadlines of Dec. 1 of this year for larger fund groups and June 1, 2019, for smaller groups. Confused? You're not alone.


The Securities and Exchange Commission announced Wednesday evening that it had extended by six months Rule 22e-4's bucketing requirement, allowing funds to delay implementation of that portion of the liquidity risk management program mandated by the rule. What the SEC didn't say in its announcement is that it also has pushed off by six months the requirement for boards to approve their funds' risk management program. That tidbit can be found in the longer release that the Commission posted on its website late the following day, along with other, more detailed information about what needs to be in place when. 


Take a look at our story, which was updated on Friday to spell out precisely what the SEC has changed in the rule and how mutual fund boards are affected. We are continuing to follow and analyze the situation and will keep our readers informed as the process moves along through the new comment period and ahead of the various compliance deadlines. 


In other regulatory news, Investment Management Division Director Dalia Blass has begun speaking with mutual fund directors, industry lawyers, and others who work with fund boards as she begins her review of director duties. We've heard a lot of ideas about what boards would like to see removed from their list of responsibilities, and individuals who've spoken with Blass say she's sincere in her efforts to respond to the market. We'll keep an eye on this and keep readers informed along the way.


In the legal realm, we saw the dismissal earlier this month of a 36(b) case against JPMorgan. The dismissal was done on a motion from the defendant, therefore prior to discovery, and some are pointing to the judge's action as an important development that supports theories that the plaintiffs' bar may soon give up accusing fund firms of charging excessive fees. Though nearly two dozen such cases have been filed in recent years, only this case against JPMorgan has been filed since the August 2016 AXA decision.


Is your fund group considering a shareholder vote? We spoke to proxy solicitation experts about when the board should get involved (early!) and how to go about properly planning the vote in order to maximize participation among shareholders and get the intended results. This is an expensive endeavor; therefore, it's worth doing right. 


Finally, please read our latest Viewpoints, contributed by Marissa Parker and Joseph Kelleher from Stradley Ronon. They provide an update on "opting-out," which involves a fund choosing not to participate in a class but rather filing direct suit against a defendant. The authors explore the costs and risks of direct litigation, as well as other issues that can arise when a fund becomes a plaintiff. We're always looking to add industry experts to our roster of Viewpoints authors, so please contact us if you've got an idea and would like to write about it. These contributed articles do not go behind our paywall and therefore can easily be shared with colleagues and clients. 


For now,


Hillary Jackson, founding editor



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