North American Securities Administrators Association, Inc.
March 10, 2004
Jonathan G. Katz, Secretary Via e-mail to firstname.lastname@example.org
RE: Release No. IC-26323; File No. S-7-03-04
Dear Mr. Katz:
The North American Securities Administrators Association, Inc. (NASAA)1 is pleased to comment on the rule proposed by the Commission that would require registered investment companies ("funds") to adopt certain governance practices. The stated purpose of the proposal is to enhance the independence and effectiveness of fund boards, and to improve their ability to protect the interests of the funds and their shareholders.
Under the proposal, funds that rely on any of ten enumerated "Exemptive Rules" would have to adopt certain governance standards. These include the following:
NASAA supports SEC efforts to enhance the ability of fund boards of directors to manage conflicts of interest that arise between the fund adviser and the fund. Enforcement actions brought by state regulators and SEC underscore the fact that the structures of many fund boards are inadequate to effectively oversee fund management. NASAA applauds SEC efforts to define fund governance standards, and to condition availability of key exemptions under the Investment Company Act of 1940 involving serious conflicts of interest upon satisfaction of those standards.
The SEC proposal also is consistent with standards for fund management that recently have been adopted by the administrators of several large state pension funds.
If you have any questions, please do not hesitate to contact Robert Lam, Chair of NASAA's Shareholders' Rights Project Group and Chairman of the Pennsylvania Securities Commission.