MFDF Board Chair Publishes Article on Conflicts of Interest

The Mutual Fund Directors Forum Board of Directors Chairman, Andrew “Buddy” Donohue, recently published an article in Fund Board Views titled “Conflicts of Interest: Investment Advisers.” The article is the first in a five-part series covering potential areas where conflicts of interest may exist. In the first article, Mr. Donohue explores the practices that led to the enactment of the Investment Advisers Act and areas where boards should remain continuously vigilant. Areas where conflicts could be found include: Transactions with affiliated entities; Research and soft dollar arrangements; Fees; Competing Investment Products; Cross-trades; Valuation of portfolio securities, and several others. To identify potential conflicts, Mr. Donohue suggests the board “understand the functions that the investment adviser will be performing for you and then use that vantage point to evaluate the potential conflicts of interest that the adviser might have.” Additionally, fund directors will want to consider whether the conflict identified could adversely impact the shareholder. Fund boards should review conflict of interest disclosures provided by the adviser and inquire how the adviser would manage the identified conflicts. Mr. Donohue encourages directors to ask questions “so you can fully appreciate the potential conflicts, how they might impact the advice being provided or otherwise affect the client, and the adviser’s manner of addressing those conflicts.” 

Click here to read the article “Conflicts of Interest: Investment Advisers.”