June 29, 2005
Independent Chairmen of Mutual Funds
Posted by Caroline Bradley

So the SEC voted to reinstate the independent chairman rule. This is the rule the DC Circuit remanded for consideration of the costs of the rule, noting:

the disclosure alternative was neither frivolous nor out of bounds and the Commission therefore had an obligation to consider it... The Commission may ultimately decide the disclosure alternative will not sufficiently serve the interests of shareholders, but the Commission – not its counsel and not this court – is charged by the Congress with bringing its expertise and its best judgment to bear upon that issue.

Foreseeing this would happen Larry Ribstein (among others) expressed some concerns. Like it or not, the issue of the costs of regulation is a real one, and it deserves more consideration than seems to have happened here. And regulators in other places have recently been adopting the strategy of requiring firms to disclose why they don't choose to adopt particular examples of best practice in governance.

Update: I've just been reading Commissioner Glassman's highly critical comments on the reconsideration of this rule.

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