Subject: File No. S7-03-04
From: Gary A Denton, Ph.D.

September 11, 2006

As an indiviual investor, I have most of my retirement savings invested in mutual funds. I strongly support the proposed rule that would require an independent chairman and at least 75% independent board members. The public needs for all the boards of directors of mutual funds to be truly independent of the fund management and working to direct/oversee the funds for the benefit of the shareholders. But this begs the question of what really makes a director independent. Not working for the investment company is an obvious requirement. But the process of nominating people to the board of directors is far from perfect. Most companies boards have a nominating committee that picks the candidates for election to the board of directors. All the shareholders can typically do is vote "no" on a candidate if they are uncomfortable with that nominee. A truly independent board of directors would result from a more open nominating process.
I also believe that someone who sits on the board of directors of a corporation that does business with a mutual fund, such as using it for a 401-k, should not be considered an independent director. This type of situation creates an unseemly appearance of a conflict of interest.