SEC Fights Itself to Save Mutual Fund Rule

In a divisive 3-2 vote, the Securities and Exchange Commission amended and re-approved a proposed rule requiring the directors of mutual funds to be independent that had been ruled against by a federal court a little more than a week ago. Ruling in a suit brought by the U.S. Chamber of Commerce, the court said that the commission had not taken into account any alternatives and did not consider the costs of the rule, which would require that at least 75 percent of a fund's directors be independent. To address the court's concerns, the amended rule added details about compliance costs and other matters. "We've done the right thing," SEC Chairman William Donaldson said in a statement, adding that the SEC had laid out in detail what implementation would costs funds, and that it had concluded that simply disclosing whether or not directors were independent would not be adequate. Yesterday's vote was seen by some as a rush to get the rule implemented, since Donaldson is due to step down today, thus changing the balance of opinion at the commission. The Chamber of Commerce promised to sue again.