The Securities and Exchange Commission is moving closer to forming rules to strengthen the role of outside directors on boards at fund companies.

On Wednesday there will be an open meeting to discuss proposals prepared by Paul Roye, the director of the SEC's investment management division. If at least three of the SEC's five commissioners vote in favor of the proposals, they will be published for public comment. That typically happens within a day of an affirmative vote.

In a previous interview with American Banker, Mr. Roye said he planned to recommend ways to ensure that most board members be drawn from outside the fund company. Proposals could also call for the directors to be self-nominating and have greater access to independent legal counsel.

In addition, Mr. Roye said, the division is looking at ways to encourage outside directors to align their interests with shareholders, perhaps by becoming shareholders themselves. The SEC is also trying to develop a system to identify outside directors who should be classified as interested directors.

The initiatives stem from discussions at an SEC roundtable in February.

-- Cheryl Winokur

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