The Securities and Exchange Commission is leaning toward opening a new public-comment period on a mutual fund governance rule set aside by a U.S. court earlier this month, SEC Chairman Christopher Cox said Tuesday.
"I believe that's the direction we'll go," Cox told reporters after testifying at a Senate hearing.
The move would keep open the possibility that the disputed 2005 regulation may take effect. Suspended by a federal appeals court in Washington on procedural grounds, the rule mandates that mutual funds hire outside chairmen and that 75% of fund directors be independent from management.
The U.S. Chamber of Commerce challenged the proposal, arguing that the SEC didn't follow its own procedures in its implementation. The court agreed April 7, giving the SEC 90 days to reconsider how much the rule would cost mutual fund companies based on a new round of public comment. If the SEC doesn't act before then, the rule will be thrown out under the court order.
The mutual fund governance rule split the five commission members before Cox's arrival. His predecessor, Republican William H. Donaldson, twice sided with the commission's two Democrats to adopt the rule by a 3-2 vote.
Opening a new comment period wouldn't commit the SEC to saving or rewriting the rule, said Cox, 53, also a Republican. "We can't anticipate what those comments would be, and we would have to take that into account," he said.