Best practices implementation in mutual funds
| Published date | 01 March 2005 |
| DOI | https://doi.org/10.1108/13581980510621983 |
| Date | 01 March 2005 |
| Pages | 80-86 |
| Author | Donald Nelson,William H. Wells,Kevin J. Perry,Donald Hanson |
| Subject Matter | Accounting & finance |
Best practices implementation
in mutual funds
Donald Nelson, William H. Wells,* Kevin J. Perry and Donald Hanson
Received (in revised form): 28th October, 2004
*Department of Finance and Quantitative Analysis, Box 8151, Georgia Southern University,
Statesboro, GA 30460, USA; tel: +1 912-681-5432; e-mail: wwells@georgiasouthern.edu
Donald Nelson is an associate professor
of accounting at Merrimack College. He is
a director and chairs the audit committee
at ICM Isabelle Small Cap Value Fund.
His research interest is in the areas of
mutual fund performance and corporate
governance.
William H. Wells is the Director of The
Center for Excellence in Banking and an
assistant professor of finance at Georgia
Southern University. His areas of research
include financial institutions, capital struc-
ture and personal financial planning
Kevin J. Perry is a vice president and port-
folio manager of a financial company. He
also sits on the firm’s investment grade
and high yield asset class teams.
Donald Hanson is Chair and Associate
Professor of Accounting at Merrimack Col-
lege. He is a co-author of several review
texts for the CPA exam.
ABSTRACT
KEYWORDS: mutual funds, corporate gov-
ernance, best practices
This paper examines the implementation of
best practices for fund directors as outlined by
the Investment Company Institute (ICI) in
the summer of 1999. Following a series of
well publicised scandals across the financial
services industry, the issue of corporate govern-
ance within mutual funds is both timely and
practical. The purpose of the study is to mea-
sure the consistency of implementation of the
15 best practices within fund families. The
data indicate that mutual funds, in general,
currently follow the guidelines proposed by the
ICI. This suggests that most funds are under-
taking efforts to protect investors and separate
the interests of management from those of
investors. These findings also have implications
for proposed federal legislation. If mutual
funds have already adopted procedures designed
to protect investors, additional regulation is
redundant.
INTRODUCTION
In the summer of 1999, the Investment
Company Institute (ICI) announced a series
of recommendations intended to provide
additional protection for millions of
mutual fund investors. The recommenda-
tions resulted from the work of a group of
independent directors and mutual fund
leaders. The focus of the group was to
strengthen and clarify the role of inde-
pendent investment company directors.
The proposed series of 15 best
practices for fund directors is identi
fied in Table 1. The purpose of this
study is to examine the consistency of
implementation of the ICI’s 15 best prac-
tices across funds within a specific fund
family.
Page 80
Journal of Financial Regulation and Compliance Volume 13 Number 1
Journal of Financial Regulation
and Compliance, Vol. 13, No. 1,
2005, pp. 80–86
#Henry Stewart Publications,
1358–1988
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