CBIS Submits Comment Letter to SEC
March 10, 2004
Jonathan G. Katz
Re: File No. S7-03-04 Release No. IC-26323
Dear Mr. Katz:
Christian Brothers Investment Services, Inc. (CBIS), an investment adviser registered under the Investment Advisers Act of 1940, would like to submit comments on the Commission's January 23, 2004 Proposed Rule: "Investment Company Governance" (File No. S7-03-04; Release No. IC-26323).
CBIS manages approximately $3.5 billion for Catholic organizations
seeking to combine faith and finance through the responsible
stewardship of Catholic assets. CBIS is an active shareholder, working
with companies on a number of issues we believe are critical to the
long-term value of the
We commend the Commission for its efforts to bring greater independence and accountability to investment companies. The pooled funds that CBIS offers have long maintained boards of trustees that are composed, overwhelmingly, of independent directors. We place high value on the varied perspectives made possible by the diverse compositions of these boards.
We are deeply concerned about the implications for the fund business
resulting from the recent allegations, and admissions, of wrongdoing.
The abuses of public trust by a few impacts the credibility of the
entire industry. Restoring this trust needs to be a priority for
The principles that create public confidence in fund companies do not differ from those that apply to operating companies; independence, transparency and accountability are necessary elements of a board of directors that fulfills its mandate to represent the interests of shareholders.
We understand that many fund companies have raised concerns about
the additional costs that shareholders might be asked to bear to
comply with the SEC's proposed rules. While these costs may not be
insubstantial, we believe that they will be reasonable in light of the
need for improved
We therefore support the principles embodied in the proposed rules, and offer the following specific comments:
Board Composition and Chair
We believe that shareholders have the right to communicate with
their representatives, and to know the manner by which these
representatives were selected. The Commission adopted a rule in
2003 requiring operating companies to disclose certain information
about their nominating committees and charters, and to inform
shareholders whether there was a process by which they could
communicate directly with directors. We suggest that the
Commission consider requiring investment companies to
We further propose that the Commission consider asking boards to
evaluate the inclusivity of their current board and of their director
search process, especially with regard to women and members of minority
groups. We are concerned that typical director searches may miss
Independent Director Staff
We are also concerned about the necessity of requiring independent directors to hire their own counsel. While this may be appropriate for some funds, others will be ably served by the fund's own counsel.
We appreciate the work of the Commission in all its efforts to protect and promote shareholder rights, and thank you for the opportunity to submit these comments. Please contact me with any questions.
John K.S. Wilson