The role of a mutual fund’s Chief Compliance Officer was partially devised to assist the board in the execution of their duties. Principle among them is to ensure that the Fund complies with the Securities Laws. In many ways the CCO is the eyes and ears of the fund directors. And in return, the fund board has an obligation to guide, monitor and support their CCO.

     The purpose of this article is to describe the ways in which the mutual fund directors can accomplish this. Like any good manual their responsibilities can be summarized with an acronym. For this subject matter it is, “CARE.”

For many years the principle methodology for selecting peers to assess investment performance and fees and expenses has been based on either investment objective or investment style. This MPI Bulletin argues that a supplemental selection process should include investment strategy. The principle logic behind this concept is that to a greater and greater extent the differentiator between alternate funds is based on how investment selection decisions are made rather than the result of those decisions.

Every now and then fund directors have a serious discussion about the merits of performance fees for the fund's advisor. Perhaps the debate is incomplete and they should also discuss what it would mean if they decided to integrate a performance fee into their own compensation. Without taking a position on the relative advantages and disadvantages of this proposition, this bulletin explores this concept.

In addition to the myriad duties mutual fund directors must carry out with regard to the funds they oversee, they are faced with the added burden of setting their own pay.  The demands of the job, including the expertise required and time involved, justify being paid fairly.  However the optics of being overpaid would not be perceived favorably by fund shareholders or the financial press.