Directors' Practice Questioned
April 3, 2000
Palm Desert, Calif. - The occasional practice of mutual fund directors serving on more than one fund complex poses troubling conflicts that are best avoided, according to two seasoned industry participants.
Merrill Lynch of New York prohibits fund directors from serving on Merrill Lynch funds at the same time they serve on the boards of other fund complexes, said Philip Kirstein, general counsel for Merrill Lynch Asset Management of Princeton, N.J. The potential for conflict, in fact, is so troubling that Merrill Lynch will not permit a fund director to serve on the board of Merrill Lynch funds at the same time the director also serves on the board of an insurance company, a bank or another broker/dealer, Kirstein said.
Kirstein spoke at the 2000 Mutual Funds and Investment Management Conference here last week.
Retired independent fund director John Haire, who also spoke at the conference, agreed with Kirstein. Haire, who served as a fund director for nearly 20 years, said he would not nominate an independent director to the boards he served on if the director served on the boards of other fund complexes. Haire is the former lead director for the Morgan Stanley Dean Witter Funds of New York.
At the conference, Paul Roye, director of the SEC's division of investment management, said the SEC expected to complete its work on proposed changes to rules governing mutual fund directors by the end of the summer.