Paul Roye, director of the Division of Investment Management at the
SEC, has a few recommendations for fund firms who are not adopting a wait-and-see approach to the rule. Roye made the comments during a speech delivered on Thursday in New York.
On hiring directors:
"I also encourage you to engage in full-scale searches when you are considering new independent director candidates. A review of a single resume or a quick meeting with a potential board candidate suggested by management does not constitute a full-scale search. Independent directors should be leading the process of independent director candidate selection and nomination—not merely rubberstamping candidates suggested by management. Thus, you should be engaging in a full, responsible and deliberate process when considering independent director candidates."
On choosing a chairman:
"Perhaps most importantly, you should select an independent chairman who will be willing to stand up to management when necessary. In many ways, I believe the Commission intended the independent chairman to be a counterweight to management—and to buffer the control and influence that management can have in the boardroom. The Commission has acknowledged that a crucial challenge to every fund board involves establishing an appropriate balance between cooperation with the management company and oversight of the management company.
On the role of directors:
"I believe that the Commission anticipates that independent chairmen will fill a leadership role. At the very least, independent chairmen will (i) have charge over a fund's board meeting agenda, (ii) determine what information is provided to the board, (iii) run and establish the tone and tenor of board meetings and (iv) serve as a spokesman for the independent directors. In addition, the independent chairman can serve a liaison function with management, the board, and potentially investors and regulators."
On directors' staff:
"The decision regarding whether independent directors should hire staff is one for the directors, and not the adviser, to make. There may be a variety of reasons why management may not favor separate staff for independent directors. However, it is you, and not management, who must determine what your staffing needs are in light of your duties and responsibilities to fund directors. Again, when you are considering staffing needs, I encourage you to take full advantage of the CCO position as a resource for the board on compliance matters, keeping in mind that the CCO is ultimately answerable to a fund's board." 
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