Mutual fund board rule change nears deadline

Filed under: Banking & Finance |

Richard K. Davis spoke in Colorado Springs this week.

Aug. 28 marks the last day to submit comment about the Securities and Exchange Commission’s proposal for stricter mutual fund rules.
The deadline will likely signify an end to a months-long battle between the SEC, mutual fund trade groups and federal appellate courts about whether the rules are needed.
The SEC would like for 75 percent of a fund’s directors, including the chairman, to be independent and free from ties to the fund’s management.
The Investment Company Institute, the leading trade group for the $9.3 trillion mutual-fund industry, favors a more flexible requirement that calls for two-thirds of fund directors to be independent.
Furthermore, the ICI says it should be up to fund directors — free from SEC constraint — to decide who should chair the board.
The SEC has twice tried to implement the rule, but was blocked by a federal appellate court, which mostly defended the mutual fund industry’s main argument against the rules – that they’d impose costs that are especially burdensome for smaller funds.
In April, the court gave the SEC time to seek public comment about the proposed rule’s costs, something the court said the SEC had failed to do.
The fund industry recommended that the SEC loosen the independence requirement for directors to a two-thirds standard because of potential problems arising from the number of members on a board
Most fund boards have eight directors, with one or two drawn from management, according to the ICI.
The resignation of a single independent director from such a board could put the fund in violation of the 75 percent standard.
The ICI said that with a two-thirds standard, even a seven-person board with two management directors could withstand a resignation without violating the independence requirement.
The U.S. Chamber of Commerce opposes the proposed rule, saying that no further fund regulation is needed, and called for the SEC abandon its efforts.
David Hirschmann, the chamber’s senior vice president, said the rule isn’t needed because investors have a myriad choices if they want to invest in funds with independent directors.
Still, a number of fund investors are urging that the SEC not back down, saying the requirements are the only way to ensure the board keep the shareholder’s best interests in mind.

Wells Fargo mortgage site ranks No. 1

Wells Fargo’s Web site has been ranked by Change Sciences Group, a national research firm, as No. 1 in overall online mortgage experience.
The firm said Wells Fargo’s site was especially helpful to those learning the basics about home buying, determining whether refinancing is worthwhile, choosing the right loan, learning how to apply for a loan online and finding a loan officer.
Wells Fargo officials said the bank has a nationwide network of more than 10,000 mortgage consultants, a 24-hour phone option and an easy-to-use Internet site.

U.S. Bancorp’s CEO-to-be makes Springs stop

Richard K. Davis, who will succeed longtime U.S. Bancorp CEO Jerry Grundhofer in December, made a stop in Colorado Springs on Aug. 23.
Davis, 48, spoke to local U.S. Bank board members, top-achieving bank managers and community leaders, and the downtown Antler’s Hilton Hotel.
His message was a reminder of how important good customer service is.
Davis was appointed U.S. Bancorp Chief Operating Officer in October 2004. He has also served as Vice Chairman for the bank since that time.

Comment sought on ILCs

After placing a six-month hold on any approvals for the types of banks that Wal-Mart and Home Depot are proposing, the Federal Deposit Insurance Corp. is seeking public comment on the idea to allow such banks.
In July, nearly 100 members of Congress from both parties asked the agency to give lawmakers a chance to consider legislation that would block commercial companies from owning the banks, known as Industrial Loan Corporations.
ILCs are allowed to issue credit cards, take deposits and make loans, but they cannot offer standard checking accounts if their assets exceed $100 million.
Wal-Mart has pledged to the FDIC to stay out of branch banking and consumer lending. The new bank, officials say, would be used to handle the 140 million credit card, debit card and electronic check payments it processes each year, the company says.
The FDIC’s request for comment includes specific questions on ILCs in a number of subject areas, such as their current legal and business framework, and their possible benefits, risks and challenges for regulators.
The 45-day comment period will begin after the official request is published in the Federal Register, expected within a week or so.
The moratorium on approvals expires Jan. 31.
Rob Larimer covers banking and finance for the Colorado Springs Business Journal.