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Self-Assessments

SEC rules require virtually all fund boards to conduct an annual self-assessment. The requirement does not specify how a board should conduct the self-assessment or document it. The SEC has stated that the minutes of the board meeting at which the self-assessment is discussed should reflect the substance of the matters covered. In addition, the requirement does not prescribe the specific aspects of a board’s operations that must be considered, except in the following two areas:

  • The effectiveness of the board’s committee structure; and
  • The number of funds overseen by directors.

Given that the SEC’s requirement largely defers to boards on what the self-assessment should cover and how it is conducted and documented, practices in this regard vary widely. Many boards rely on independent counsel to help administer and coordinate the self-assessment process so as to try and preserve the attorney-client privilege over the results of the self-assessment.

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