The SEC Effect
October 29, 2001
Subsequently, in addition to a change in market conditions, the direction new SEC Chairman Harvey Pitt will take mutual fund regulation will likely determine the number and nature of those proxy proposals going forward, Martin said.
Mutual funds are not required to have annual meetings and proxies can be filed any time during the year--whenever a fund's directors want to take action--so there is not a definitive "proxy season" for mutual funds, according to Martin. Still, while fund proxies are more spread out over the course of the year than those of corporate stocks, there is a slight concentration in the fourth quarter, according to ISS.
That is especially significant for proxies that propose fund mergers this year. Mergers have increased over the past few years, and 2001 has kept up with the record pace of 2000 almost exactly, according to Lipper. An examination of proxy statements, however, suggests that many more mergers are on the way. Last year, there were 78 merger proposals among the funds that ISS tracks. Already this year, there have been 153 such proposals, indicating that, since very few are voted down, many have yet to take place.
"That makes sense," Kinnel said. "Tons of funds were launched in '98 and '99 and many haven't succeeded. At this point, a lot of firms are hiding some of their mistakes."