In a recent webinar hosted by the Mutual Fund Directors Forum (MFDF), Kelley A. Howes, an editor of the BD/IA Regulator, and Sara Yerkey, a partner at Management Practice, discussed best practices for mutual fund directors reviewing adviser profitability in the context of approving investment advisory agreements under Section 15(c) of the 1940 Act.
Under relevant judicial precedent and SEC regulation, adviser profitability is one of several factors that fund directors should consider when evaluating advisory agreements. The lack of clear guidelines regarding what constitutes a reasonable level of profitability, or an appropriate methodology for calculating such profitability, however, makes this factor particularly challenging for directors to evaluate.
The webinar was one of a series of educational events on critical issues for fund directors hosted by MFDF. A transcript of the webinar is available here.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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