Proposed Disclosure Changes Impact Directors
Written by SCA for BoardIQ.
Fund directors may face several repercussions from the Securities and Exchange Commission’s proposal regarding fund disclosure, as evidenced by comments sent to the agency from asset managers and industry stakeholders. While the proposal does not explicitly identify responsibilities for directors, boards should review the comment letters and the ultimate finalization of a few provisions in particular.
Given that the proposal was published with support of all commissioners, it is expected to move forward toward adoption, possibly later this year. Fund directors’ roles will be impacted significantly by developments in three areas: the level of detail in disclosures about the board in the new shareholder reports; the precision of reporting on principal risks; and the depth of reporting regarding the fund’s liquidity risk management program.
Disclosure About the Board
Commenters have highlighted concerns that fund investors are poorly informed about the role of the board. Added information in the shareholder report is an opportunity for the board to become more known and accessible.
The Morningstar Funds board, as reported, and Morningstar, have both supported greater disclosure about directors, including their contact information and their role. Morningstar’s letter, for instance, emphasizes that “the fundamental nature of an investment company is that independent directors represent the interests of shareholders” and that directors should therefore be “made more accessible through the annual shareholder report.”
