Aviva L. Grossman Partner

In an era of industry disruption, active Securities and Exchange Commission (SEC) rulemaking, and heightened market and regulatory focus on environmental, social and governance (ESG) matters, mutual fund, exchange-traded fund (ETF) and other registered fund directors face tough questions as they work to fill vacancies arising on a board. Identifying an independent director candidate that meets the needs of a board at a given time always has been a delicate balance of art and science. Today, some boards are rethinking the formula as they grapple with the proper criteria to consider in developing a candidate pool and selecting from it. This article lays out the regulatory landscape against which long-standing independent director selection best practices were established, identifies key step in the process, and suggests considerations around diversity and specialized skills that fund boards should consider.

In light of the recent novel coronavirus (COVID-19) outbreak and the challenges it presents for boards of directors to safely travel, the SEC issued an order on March 13, 2020, exempting all registered investment companies and business development companies, including their advisers and principal underwriters, from the in-person meeting requirements of certain provisions under the Investment Company Act of 1940.