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Fund Governance: Legal Duties of Investment Company Directors

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This book includes a fund board's legal duties under the federal securities laws/state corporate and trust law. It examines the impact of statutes and regulations, SEC guidance, and court cases.

Fund Governance: Legal Duties of Investment Company Directors is a comprehensive, authoritative and practical treatment of the legal obligations of mutual fund and closed-end fund directors, the special duties of independent directors, and fund governance best practices.

This treatise provides detailed coverage of a fund board's legal duties under the federal securities laws and state corporate and trust law. It examines the impact of statutes and regulations, SEC guidance, court cases, and best practices in the context of fiduciary duty requirements, board structure and operations, audit committees, advisory and distribution arrangements, affiliated transactions, and other aspects of fund management. It also addresses the special requirements for closed-end fund and money market fund directors, as well as director indemnification and insurance issues. Filled with insight, and featuring more than 30 forms and charts, Fund Governance: Legal Duties of Investment Company Directors looks closely at challenging questions that often arise.

Book #00663; looseleaf, one volume, 980 pages; published in 2001, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-102-6

Additional Information
Division Name Law Journal Press
Volumes 1
Product Types Books
Brand Law Journal Press
Jurisdiction National
ISBN 978-1-58852-102-6
Page Count 980
Edition 0
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Robert A. Robertson
Robert A. Robertson is a partner with the Financial Services Practice Group of Dechert LLP, an international law firm. He regularly counsels investment advisers, mutual funds, closed-end funds, fund boards of directors, private funds and institutional investors. Mr. Robertson is Chair of the American Bar Association's Subcommittee on Investment Companies and Investment Advisers. He is also an Advisory Board Member of the Mutual Fund Directors Forum. He served as an attorney with the Securities and Exchange Commission from 1990 through 1997, where his most recent position was counselor to Commissioner Isaac C. Hunt, Jr.Mr. Robertson is a frequent lecturer and has written numerous articles on securities law topics. His articles have appeared in such publications as the Business Lawyer the Investment Lawyer the Stanford Journal of Law, Business & Finance, the Review of Securities & Commodities Regulation,The National Law Journal, and the Washington Post. Mr. Robertson is a graduate of Claremont McKenna College (B.A.), Loyola Marymount University (M.B.A.), and UCLA Law School (J.D.).

§ 1.01 Early History of Fund Governance
[1] Introduction
[2] Sporadic Growth Pre-1920
[3] The Roaring Twenties and Closed-End Funds
[4] The Crash and Fixed Trusts
[5] The Great Depression and Mutual Funds
§ 1.02 1939 SEC Report on Investment Trusts
[1] Management Abuses and Deficiencies
[2] Detailed Illustrations of Abuses
[3] Remedial Legislation Enacted

Duties of Fund Directors Under State Law

§ 2.01 Overview
§ 2.02 Board Duties and Organizational Structure
[1] Corporations
[2] Business Trusts
§ 2.03 Guiding Principles
[1] “Fiduciary” Duties
[2] Business Judgment
§ 2.04 Duty of Care
[1] Oversight and Supervision
[2] Board Decision-Making and the Business Judgment Rule
§ 2.05 Duty of Loyalty
[1] General Standard Under State Law
[2] “Fairness” Standards
[3] “Interested Director” Statutes
[4] Importance of Independent Director and Non-Interested Director Status
§ 2.06 Other Responsibilities of Fund Boards Under State Law
[1] Amending Bylaws
[2] Electing Officers
[3] Authorizing Additional Shares or Other Units of Beneficial Interest
[4] Declaring Dividends and Other Distributions
[5] Calling Special Meetings of Shareholders
[6] Approving Mergers
§ 2.07 Chart: Comparison of Business Forms
§ 2.08 Chart: Comparison of Corporate Versus Fund Director Duties

“Independent” Director Requirements

§ 3.01 Overview
§ 3.02 1970 Amendments
§ 3.03 Board Composition Requirements
[1] Independent of Fund Insiders
[2] Independent of Other Conflicts
[3] “No-Load” Fund Exception
[4] Interested Persons
§ 3.03A Conflicts of Interest Disclosure
§ 3.04 Independent Director Questionnaires
§ 3.05 Form: Independent Director Questionnaire
§ 3.06 Form: Independent Legal Counsel Memorandum

Board Structure and Operation

§ 4.01 Introduction
§ 4.02 Board Membership
[1] Ineligible Persons
[2] Shareholder Election
[3] Director Recruitment
[4] Board Diversity
§ 4.03 Basic Board Structure
[1] Board Size
[2] “Unitary”/“Pooled” Boards
[3] “Cluster” Boards
§ 4.04 Board Leadership and Committees
[1] Board Leadership
[2] Principal Committees
§ 4.05 Board Meetings
[1] Scheduling
[2] Agendas
[3] Pre-Meeting Preparation
[4] Independent Director-Only Sessions: Rule 0-1(a)(7)
[5] Board Minutes
§ 4.06 Director Compensation
§ 4.06A Deferred Compensation Plans
§ 4.06B Director Fund Share Ownership
§ 4.07 Board Performance Evaluations
[1] Background
[2] Rule 0-1(a)(7)
[3] Industry Guidance
[4] Self-Assessment Questionnaire
§ 4.08 Retirement Policy and Term Limits
§ 4.09 Independent Legal Counsel
[1] General Requirements
[2] “Sufficiently Limited” Management Representation
[3] Fund Representation Permissible
[4] Independent Directors May Rely on Management/Fund Counsel
§ 4.09A Related SEC Exams
§ 4.10 Form: Drafting Guide and Audit Committee Charter
§ 4.11 Form: Nominating and Administration Committee Charter
§ 4.12 Form: Director and Officer Questionnaire
§ 4.13 Form: Board Self-Evaluation
§ 4.14 Form: Audit Committee Self-Evaluation
§ 4.15 Form: Board Meetings Calendar
§ 4.16 Forms: Trust Formation Written Consents
[1] Initial Sole Trustee Organizational Matters
[2] Initial Sole Trustee Appointment of Full Board
§ 4.17 Forms: Board Approval Resolutions
[1] Governance
[2] Fund Registration
[3] Portfolio Management
[4] Administration and Custody
[5] Distribution
[6] Ethics and Bonding
[7] Certain Transactions with Affiliates
[8] Fund Mergers
[9] Other Matters
§ 4.18 Forms: Audit Committee Resolutions
[1] Audit Engagement (Approval)
[2] Audit Pre-Approval Procedures (Approval)
[3] Non-Audit Services (Approval)
§ 4.19 Forms: Independent Trustee Resolutions
[1] Lead Independent Trustee (Appointment)
[2] Independent Trustee Counsel (Selection)
§ 4.20 Form: Written Consent of Sole Shareholder

Director Liability Indemnification and Insurance

§ 5.01 Overview
§ 5.01A Director Litigation Risk

[1] Prospectus Liability
[2] Fiduciary Obligations
[3] Fee Litigation
[4] Closed-End Fund Governance
[5] Defense Costs
§ 5.02 Indemnification
[1] Introduction
[2] State Corporate Authority
[3] State Trust Authority
[4] Federal Preemption
[5] Advancement of Attorney Fees and Other Expenses
§ 5.03 Insurance
[1] Introduction
[2] State Corporate Authority
[3] State Trust Authority
[4] Federal Preemption
[5] Typical Policy Structure
[6] Analysis of Basic Policy Provisions
[7] Defending Claims
§ 5.04 Form: Indemnification Agreement (Sample 1) 
§ 5.04A 
Form: Indemnification Agreement (Sample 2) 
§ 5.05 
Form: D&O Insurance Policy

Board Approval of Advisory Agreement

§ 6.01 Overview
§ 6.02 The Advisory Agreement

[1] Services Provided
[2] Fee Structure
[3] Expense Allocation
[4] Required Operational Terms
§ 6.03 Approval of “Written Contract” 
[1] Sections 15(a)

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