Alert August 05, 2008

Independent Directors Council Issues Report on Oversight of Derivative Investments by Registered Fund Boards

The Independent Directors Council issued another in its series of reports addressing areas of particular interest for the directors of registered investment companies, this one concerning oversight of fund investments in derivatives.  The report discusses (a) board oversight responsibilities for fund investments in derivatives, (b) definitions and primary categories of derivatives, (c) portfolio management applications, risks, and controls for fund investments in derivatives, (d) operational and regulatory considerations for fund investments in derivatives and (e) related board practices and resources.  A significant portion of the report is devoted to appendices that present topics for discussions between fund boards and advisers regarding derivatives investments, and provide a glossary of terms, examples of derivatives applications, and references to additional educational resources.