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SEC Proposes Independent Director Rules

The SEC has proposed rules to enhance the effectiveness of investment company directors. The proposed rules would require that, for funds relying on certain exemptive rules: (i) independent directors constitute either a majority or two-thirds of the board; (ii) independent directors select and nominate other independent directors; and (iii) legal counsel for the fund's board be independent. Some of the other proposed rules addressed topics such as requiring funds to provide better disclosure about directors and preventing qualified individuals from unnecessarily being disqualified from serving as independent directors. Comments on the proposed rules are due at the SEC by January 28, 2000. (SEC Release IC-24082, available on the SEC's website at The SEC also published its views concerning certain issues relating to independent directors of registered investment companies (e.g., guidance as to what constitutes a material business and professional relationship under Section 2(a)(19) of the 1940 Act, information as to what constitutes a joint transaction under Section 17(d), how to determine when a fund can advance legal fees to its directors consistent with Section 17(h), and when an open-end fund may compensate directors with shares of the fund consistent with Section 22(g)). The release became effective on October 14, 1999. (SEC Release No. IC-24083, available on the SEC's website at

For more information, contact:
Michael R. Butowsky at (212) 940-6757 or e-mail, or Daren R. Domina at (212) 940-6517 or e-mail

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