Chamber Files Motion to Stay SEC Mutual Fund Rule

WASHINGTON, D.C.—The United States Chamber of Commerce today filed a motion to stay the SEC's mutual fund rule with the U.S. Court of Appeals for the D.C. Circuit.

"The SEC's decision to ignore the appellate court ruling and rush through a re-run of their flawed rulemaking on mutual fund directors is an outrageous attempt to circumvent our legal and regulatory process," said Stephen Bokat, Chamber general counsel and executive vice president of its litigation center. "The SEC cannot simply ignore rulings. Unless and until they obey the court's directive to consider economic impacts and alternatives, the court should stay the SEC's implementation of the rule."

In response to a challenge by the Chamber of the SEC's mutual fund rule, the appellate court recently sent back the SEC rule requiring mutual funds to have an independent chairman with 75 percent of their directors being independent. Following that decision, former SEC Chairman William Donaldson proceeded to rush through a readoption of the same rule the day before he stepped down from his post without providing an opportunity for public notice or comment.

Once again, the Chamber petitioned the appellate court to review the SEC rule, and pursuant to procedural requirements, asked the SEC to stay implementation of the rule during the court's consideration of the petition.

The SEC failed to satisfy basic rulemaking requirements by not giving serious consideration to public comments during the regulatory process; 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. Under the Administrative Procedures Act, government agencies must consider the costs and benefits of rules imposed on industry, and must allow affected persons to be given notice and opportunity to comment on proposed rules.

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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