The U.S. Court of Appeals for the D.C. Circuit issued an opinion last Friday holding that the SEC failed to allow public input on its proposed rules governing mutual fund boards of directors. You can access the opinion here. The rule that was challenged:
The Rule requires that mutual funds relying on the Exemptive Rules adopt certain governance practices, including those set forth in two conditions: a fund must have (1) a board with no less than 75% independent directors and (2) an independent chair.
Holding:
The Commission is in a better position than the court to assess the disruptive effect of vacating the Rule’s two conditions. Therefore, the court will vacate the 75% independent director and independent chair conditions of the Rule but, given the court’s expectation in Chamber I that the Commission could “readily” address costs, 412 F.3d at 144, withhold the issuance of its mandate pursuant to Rule 41(b) for ninety days. Such an approach is not unprecedented. . . This approach will afford the Commission an opportunity to reopen the record for comment on the costs of implementing the two conditions. Within ninety days the Commission shall file a status report with the court, unless the Commission shall have prevailed on a motion to modify, accelerate, or postpone the mandate, and upon further order the mandate will issue.