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Disclosure

The SEC requires that extensive disclosures be made to investors about a fund, including the fund’s board. These disclosures are contained in a fund’s registration statement, shareholder reports, and proxy statements. As signatories of a fund’s registration statement, directors may be liable under the federal securities laws for material misstatements or omissions in the registration statement, including the prospectus. For this reason, directors should be familiar with fund disclosures and satisfy themselves that the disclosures are accurate and complete. Further, prudence suggests that directors be comfortable with the process by which fund disclosures are prepared and updated.

Some of the disclosures that must be made about individual directors include the following:

  • Director’s principal occupation during the past five years;
  • Other directorships held by the director during the past five years;
  • The compensation paid to the director by the fund and the fund complex;
  • The number of funds overseen by the director;
  • The director’s ownership in each fund overseen (using specified dollar ranges rather than an exact dollar amount);
  • The qualifications of the director; and
  • The reasons why that person should serve as a director of the fund.

The disclosures that must be made about the board include:

  • Information about the responsibilities of the board and its standing committees;
  • Its leadership structure;
  • Its role in risk management oversight; and
  • The consideration of diversity in the process by which candidates for director are considered for nomination by the fund’s nominating committee.

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