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Prior to Joining a Fund Board

Candidates for membership on a fund board should realize that joining a fund board is not a responsibility to be taken lightly. The structure of an investment company is complex and at times quite technical. For those who do not have fund industry experience, the learning curve is steep and long. There are a number of factors that fund board candidates may wish to consider when making the decision to join a fund board.

Board Opportunity Due Diligence Considerations. While joining a fund board is likely to be an interesting and fulfilling experience, that experience carries with it legal responsibilities and attendant liabilities. As a result, director candidates should be mindful to “kick the tires” of the fund complex they are thinking of joining. No two complexes are the same and it is important for candidates to satisfy themselves that the complex in question is right for them. Among the questions that candidates may wish to consider asking before joining a board are:

  • Who are the individuals currently on the board? Is there a mix of backgrounds and expertise on the board and how do I fit in both professionally and personally?
  • Who is the adviser? What is its reputation in the industry? Has the adviser been the subject of significant compliance or legal concerns?
  • Why am I being considered and what expectations would the board have of me?
  • How is the relationship between the adviser and the board?
  • How is the board structured? What committees exist? How often do they meet? Does the board size seem appropriate in light of the number of funds overseen?
  • Does the board have an independent chair or a lead director?
  • What is the amount of D&O insurance coverage provided and who is the insurance carrier?
  • What is the compensation of the directors?
  • Do the independent directors have independent counsel? If not, why not? If so, is it a reputable firm that is knowledgeable in the field?
  • How much time is involved in preparing for board meetings?