SEC Chair Outlines Expectations for Fund Directors

The board of directors plays a central role in mitigating conflicts inherent in the relationship between a hedge fund and its manager. See “Conflicts Remain an Overarching Concern for the SEC’s Asset Management Unit” (Mar. 12, 2015). In her keynote address at the Mutual Fund Directors Forum 2016 Policy Conference, SEC Chair Mary Jo White shared her view on the role of directors in assessing risks to mutual funds and conveyed her perspective on what fund directors should be considering and doing in 2016. Delivered to mutual fund directors, White’s remarks also provide valuable guidance to hedge funds and other private investment funds as to SEC expectations for director oversight. Specifically, White suggested appropriate questions for fund directors to ask, explored the limits of director oversight and provided the enforcement perspective on fund directors. This article summarizes the portions of White’s speech most relevant to hedge fund managers. For more on hedge fund governance, see “Walkers Fundamentals Hedge Fund Seminar Addresses Fund Structuring Trends, Governance Best Practices, Fee and Liquidity Terms, Irish Vehicles, Marketing in Asia and FATCA” (Feb. 12, 2015); and “Former SEC Commissioner Roel Campos Discusses Hedge Fund Governance With Hedge Fund Law Report” (Mar. 8, 2012). For additional insight from White, see “SEC Chair Emphasizes Enforcement Focus on Strong Remedies and Individual Liability” (Nov. 12, 2015); “SEC Chair Highlights Two Types of Risks Hedge Fund Managers Must Consider” (Oct. 29, 2015); and “SEC Chair White Describes the SEC’s Game Plan With Respect to the Asset Management Industry” (Dec. 18, 2014).

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