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Mutual Funds – Investment Advice for Financial Beginners - August 2007 Print E-mail
Written by Tom F. Roake   

As someone with little financial experience, making the leap from saving to investing can be more than a little daunting, especially when banks pay consistent interest and guarantee deposits. However, interest rates paid by banks are typically much lower than rates available to investors, and could even result in financial loss if they are less than inflation. In order to make the switch from saving to investing, it is important to understand how the market works, the types of investments available, and the best way in which to meet your goals through investing.

“Let’s Move On; Let’s Talk About It”: The Real Role of the Independent Chair - March 2007 Print E-mail
Written by C. Meyrick Payne   

Throughout the course of the long debate over the SEC’s proposed rule to require 75% independent board members and an independent chair on a mutual fund board, many observers have come to appreciate that the change is relatively small and quite subtle. After all the Audit, Nominating and Contracts committees are all chaired by independents and most fund groups already have a lead independent director. The real difference is in the explicit control of the board’s agenda. 

Lessons for Fund Directors from the "Bisys Crisis" - November 2006 Print E-mail
Written by C. Meyrick Payne, Partner, Management Practice Inc.   

The SEC has recently investigated the activities of Bisys Fund Services, a well known provider of administrative, transfer agency and fund accounting services, and 27 of their mutual fund clients.

This investigation alleges improper payments from Bisys to their clients for distribution and other services, which the Wall Street Journal describes as kickbacks of $230 million. More recently the SEC disclosed a similar investigation into SEI, another provider of back-office services. In essence this conduct constitutes taking money from fund shareholders described as being for one purpose and using it for another. The larger problem is that this conduct seems to have been conducted under agreements which were kept secret from the mutual fund boards.

Debating the 75% Independent and the Independent Chair Rule - January 2006 Print E-mail
Written by C. Meyrick Payne   

Make no mistake, the current debate in the mutual fund industry is about how powerful Mutual Fund Directors need to be to protect America’s savers from potential misdeeds of those who control the $8.5 trillion dollars of mutual fund money. Generally speaking fund directors have been becoming more powerful for many years, particularly since a leader of the governance process has been identified. This MPI Bulletin looks at the substantive arguments on both sides.

MPI Presents Training Session to the SEC - September 2005 Print E-mail
Written by C. Meyrick Payne and Jay Keeshan   
Management Practice Inc. (MPI) was recently asked by the Securities and Exchange Commission to present to a group of about 100 employees as part of their ongoing training program about mutual fund governance and the world of independent directors. We presented in five modules:
A Realistic Approach to Evaluating Board Performance Print E-mail
Written by C. Meyrick Payne of Management Practice Inc., a consulting firm focused on the needs of independent   
One of the most important of the ICI's Advisory Committee on Best Governance Practice is that Board periodically evaluates its performance. In spite of this recommendation, the process has not been fully embraced partly because of fear that any written document which is even slightly critical might be used by the plaintiff's bar to bring a lawsuit against the directors. The ICI Advisory Committee was deliberately vague about the measures and criteria to use because each board is quite different and faces different set of priorities. Now the SEC is set to require a similar process. The time has come to delve into the philosophical foundation of a realistic Board evaluation.

Several years ago a well known financial planner came up with an evaluation method which tried to correlate certain elements of governance with fund performance, expense control and investor service. This index became known as the Mutual Fund Board Index (MFBi). While arithmetically correct, the MFBi was misleading because it was based on historical data and assumed that fund directors had control over investment performance. Additionally the index assigned grades and expressed them in rank order which meant that a board which had strong oversight procedures might score badly because fund performance was poor. The experience with MFBi unnerved directors and counsel alike.
Watchdogs Bite Back Print E-mail
Written by John Winthrop, Independent Trustee of the Pioneer Funds   
The concerns of independent trustees of investment companies are growing. The number of responsibilities seems to be increasing; the assignment is becoming more complicated.

In 1940 there were only 68 mutual funds, according to The Mutual Fund Fact Book published by the Investment Company Institute. In 1972 there were 361 funds. Thirty years later, at the end of 2002, there were 8,256 funds. Those of us who have been involved in this growth industry over the past three decades now live in a very different world.
What Can Trustees Actually do About Levitt's Criticisms of Mutual Funds? Print E-mail
Written by C. Meyrick Payne, Senior Partner, Management Practice Inc.   
Arthur Levitt may have become even more influential now that he is no longer Chairman of the SEC. Certainly his book, Take on the Street, is influencing legislators and regulators in the post-Enron era. His chapter detailing the "seven deadly sins" of the mutual fund industry is particularly damning. Whether a diligent fund director agrees or disagrees, it would be foolhardy to dismiss Levitt's criticism as ill-informed or casual. This MPI Bulletin begins to answer the question "What should fund directors do about them?"
Strengthening the Role of Mutual Fund Directors After the Canary Scandal Print E-mail
Written by C. Meyrick Payne, Partner Management Practice Inc.   
The lesson of the Canary Capital scandal for mutual fund directors is that they need to have even more authority over the compliance function, spend more time understanding the economics of the asset management business and perhaps even be additionally compensated for their time and attention. Of course, there is no point if they are not truly independent of the management company. The worse result possible would be if investors, regulators and industry experts just threw up their hands, declared fund governance ineffective, and went about replacing fund directors with an army of Federal and State regulators. Independent oversight has worked well for over 60 years. The job post-Canary is to strengthen governance, not tear it down.

The first step in this task is to identify the point at which the governance system fell apart. Late trades are illegal and anyone with knowledge that such trades were being executed is in trouble. So the first question is, "Did the fund directors know that late trades were being booked?" There is no indication in Eliott Spitzer's complaint that the directors knew.
The Advisor is Selling: Responsibilities of the Independent Trustee Print E-mail
Written by Neil L. Diver, former trustee of the SIFE Funds whose investment advisor was sold to Wells Fargo   
The sale of a mutual fund investment advisor causes the independent trustees to assume unique but very important responsibilities to discharge their obligations to the fund's shareholders. This Bulletin discusses the typical motivations that cause the advisor to consider selling and highlights the duties of the independent trustees before and during the sales process. A successful sale is a time-consuming, emotional, and lengthy deviation from business as usual for the advisor and independent trustees, which, if not managed adroitly, may negatively impact the fund shareholders and the advisor's value.
A Very Full Agenda for Mutual Funds Trustees Belies Current Criticism Print E-mail
Written by John Winthrop, an Independent Trustee of the Pioneer Funds, argues that recent criticism by the fina   
No attempt to list the growing issues confronting independent trustees today can be complete. Over the past year we have seen that even the list of "hot button" items can be elusive. Those of us in the trenches know that our duties are more complex than our counterparts on traditional company boards. A brief review of some of the issues confronting independent trustees of mutual funds might be helpful in giving substance to these general comments:


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