We also believe that it would be helpful to clarify the Commission's role and procedures in connection with disputes between independent fund directors and fund management. a company which is not controlled by another company. -[24]-  See, e.g., In the Matter of Parnassus Investments, et al., Initial Decision Release No. Independent Investor is a news and educational portal covering latest events in the world of trading and investment. Fund directors must fulfill this responsibility, regardless of whether they may personally benefit from their actions, or whether their actions are contrary to the wishes of fund management. If, in fact, the directors were motivated solely by self-interest, they may have breached their duties of care or loyalty under state law or breached their fiduciary duties under section 36(a) of the Act.54But whether rule 17d-1 applies turns on the nature of the transaction, not on its propriety or the affiliate's motives, provided that the directors are acting within the scope of their duties. 9, 1999, at D19; and Edward Wyatt, Empty Suits in the Board Room; Under Fire, Mutual Fund Directors Seem Increasingly Hamstrung, N.Y. Times, June 7, 1998, at C1. Despite a potential reduction in the capital gains tax advantage, it is an advantage that should continue to provide some positive benefits in producing after-tax returns. The Commission has used its authority under section 36(a) in a number of cases, including cases in which the Commission called into question the conduct of a fund's independent directors. Section 17(d) and rule 17d-1 generally prohibit an affiliated person of an investment company (which includes a fund director) or an affiliated person of such person ("affiliate"), acting as principal, from participating in or effecting any transaction in connection with any joint enterprise or other joint arrangement or profit-sharing plan in which the investment company is also a participant, unless an application regarding the joint arrangement has been filed with and an order authorizing the transaction has been granted by the Commission. 1999); and Verkouteren v. Blackrock Financial Management, Inc., 98 Civ. Its officers are usually employed and compensated by the fund's investment adviser, which is a separately owned and operated entity. -[45]- See Southwestern Investors, Inc., SEC No-Action Letter (June 13, 1971) (fund director who is an officer and director of company A may not be disinterested if the president of a company that indirectly controls the fund's investment adviser and principal underwriter also serves as a director of company A). While many investors try to exercise a long-term disciplined approach, the investment marketplace can provide various, tempting options; for instance, a sudden drop in the marketplace, or a pending worldwide event. The Act requires that a majority of a fund's independent directors: approve the fund's contracts with its investment adviser and principal underwriter;5 select the independent public accountant of the fund;6 and select and nominate individuals to fill independent director vacancies resulting from the assignment of an advisory contract.7 In addition, rules promulgated under the Act require independent directors to: approve distribution fees paid under rule 12b-1 under the Act;8 approve and oversee affiliated securities transactions;9 set the amount of the fund's fidelity bond;10 and determine if participation in joint insurance contracts is in the best interest of the fund.11 Each of these duties and responsibilities is vital to the proper functioning of fund operations and, ultimately, the protection of fund shareholders.12, In addition to the requirements of federal law, directors must abide by standards of care prescribed by state statutory and common law.

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