Pols Give Funds a Boost

Susan Ferris Wyderko, executive director of the Mutual Fund Directors Forum, a nonprofit organization dedicated to improving mutual-fund governance, says a rule requiring that the majority of fund board members be independent was previously adopted but it was later challenged in court and is not currently enforced. Wyderko, who was formerly with the SEC's Division of Investment Management says "it is clear that the issue is still alive at the SEC."

Another corporate governance issue that will stay in the spotlight next year is the issue of economic arrangements between advisors and third-party consultants. This was brough into focus a few months ago when the SEC began investigating more than two dozen fund companies believed to have accepted kickbacks from independent contractors in exchange for big jobs. The investigation was prompted when an administrative services unit of Bisys(BSG Quote) said it had been doing this at the expense of shareholders.

Wyderko says the Bisys settlement had an immediate impact on the industry as mutual fund directors now understand that they need to ask additional questions about economic arrangements between advisors and third-party consultants. "The open question is how many and what kind of entities the [SEC] will decide to move against in the enforcement context," she says adding that "I assume we will see additional shoes dropping by the SEC in the coming year."