Federal Judge Denies Chamber's Appeal on Independent Chairmen
October 25, 2004
A federal appeals court has denied a request by the U.S. Chamber of Commerce to delay new rules requiring mutual funds to have independent chairmen. The world's largest business group had launched a campaign to postpone more stringent governance measures adopted by the Securities and Exchange Commission this past summer pending the outcome of its lawsuit challenging the move.
In a ruling Monday, the U.S. Court of Appeals in Washington denied the chamber's motion to delay the rules, which are scheduled to go into effect in January 2006.
The chamber contends that the SEC does not have the legal authority to set higher standards for fund directors. It further argues that placing restrictions on mutual fund companies' board decisions and management is not in the best interests of fund shareholders and that a one-size-fits-all approach could have negative, unintended consequences.
The move represents a significant change to the dynamic of the boardroom and has already begun imposing costs on funds as they scramble to hire more independent directors.