The Independent Directors Council issued another in a series of reports discussing the duties of mutual fund boards of directors. This report focuses on board oversight of fund compliance. The report examines how fund boards may help define the mission and goals of a fund’s compliance function and describes some common themes among fund groups in this area. The role of the fund chief compliance officer (“CCO”) is discussed including the potential issues related to using a CCO who serves only as fund CCO and not as CCO of the fund’s adviser, as compared to a fund CCO who also serves as the adviser’s CCO. The report also explores the role of fund management in supporting compliance and the CCO role. Finally, the report addresses the board’s role in compliance, primarily in the areas of (a) board communication with a CCO at and between board meetings; (b) board evaluation of a fund’s compliance program and its CCO (including possible considerations for such an evaluation) and (c) board review and approval of CCO compensation. Appendices to the report provide a sample fund CCO job description and suggested fund CCO goals.
Alert September 15, 2009