[JURIST] A three-judge panel of the US Court of Appeals for the DC Circuit [official website] Friday unanimously ruled [opinion text, PDF] against US Securities and Exchange Commission [official website] corporate governance regulations [text; SEC materials] that require mutual fund companies to appoint independent chairpersons and compose at least 75 percent of their boards with independent members. The US Chamber of Commerce [advocacy website] praised [press release] the holding, which the DC Circuit based on the failure of the SEC to give the public an adequate "opportunity for comment" before adopting the rules. The panel stayed the ruling and allotted 90 days to the SEC to allow the public to comment on the rules before it hears arguments from the SEC again. The court found it imprudent to immediately vacate the rules, however, saying,
[A] significant portion of the mutual fund industry appears to have come into substantial compliance with the Rule. This compliance tends to suggest that immediate vacation of the two conditions risks substantial disruption to the mutual fund industry because of the resultant inconsistent governance practices that would arise within the industry, which also might sow confusion in the investing public.The SEC adopted the regulations in 2004 to stymie rampant abuses in the fund industry, and in June 2005 the DC Circuit ordered the SEC to revise the regulations [JURIST report].
The Chamber originally filed the suit, contending that the mandate for independent chairpersons overburdened mutual fund companies. AP has more.