U.S. Chamber Files Suit Against New Mutual Fund Rules

WASHINGTON, D.C. – The United States Chamber of Commerce filed suit to overturn a Securities and Exchange Commission's rule requiring mutual fund boards of directors to have an independent chair and that 75 percent of the directors be independent as well.

"The SEC has over-reached its authority, resulting in a rule that is bad for investors and contrary to the intent of Congress," said Stephen Bokat, U.S. Chamber general counsel and head of the Chamber's legal arm, the National Chamber Litigation Center.

Congress specifically permitted mutual fund advisers to play a significant role in governing fund investments, mandating in the Investment Company Act that only 40 percent of directors be independent, according to the Chamber's filing. The SEC's rule far exceeds these Congressional requirements.

Furthermore, the SEC rule eliminates an investor's right to invest in funds whose leadership is affiliated with an established adviser.

"Mutual fund investors often select funds based on the reputation of the adviser who they expect will provide leadership for the fund," said Bokat. "The SEC has unlawfully eliminated a valid investment decision."

The SEC failed to satisfy basic rulemaking requirements by not giving serious consideration to public comments during the rulemaking; ignoring important information about the costs – and the consequences – of the rule; and failing to consider evidence that an independent chair is likely to harm rather than help fund performance.

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

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