Release Date: Apr 07, 2006Contact: 888-249-NEWS
Chamber Praises Court Decision on SEC Mutual Funds Rule
WASHINGTON, D.C.-The National Chamber Litigation Center applauded today's decision by the U.S. Court of Appeals for the D.C. Circuit finding that the SEC failed to allow public input on its proposed rules governing mutual fund boards of directors.
"The court had a simple message for the SEC today: you can't run roughshod over the rulemaking process," said Steve Bokat, NCLC's executive vice president. "The SEC rushed to reissue the mutual fund rule without conducting the thorough review requested by the Court."
The Chamber called the court's decision to allow the SEC 90-days to reconsider the rule in light of additional public comments "appropriate" and pledged to work with the commission. "We look forward to sharing our views with the SEC as they decide how to address the issues raised during these proceedings," said Bokat.
In 2004, the SEC enacted requirements that mutual funds have an independent chair of the board of directors, and that 75 percent of board members be independent. In a challenge to the proposal brought by NCLC, the Court ruled that the SEC failed to examine the costs of implementing the proposed changes and the adequacy of available alternatives, such as disclosure. The court instructed the SEC to carefully consider these issues, but the agency reissued the rule in just eight days.
In its challenge, NCLC argued that on remand, the Commission considered materials on which the public was not given the opportunity to comment. Furthermore, the SEC ignored the court's instructions to consider a disclosure alternative to the independent chair provision.
"This decision recognizes that hasty revisions that exclude a public comment period should never be allowed to stand," said Bokat.
The National Chamber Litigation Center is a membership organization that advocates fair treatment of business in the courts and before regulatory agencies. The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.
Editor's Note: A copy of the court's decision is available online.