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March 5, 2019

Why Mutual Fund Board Meeting Software is Necessary for Negotiating Advisory Contracts


 Millions of people choose to place their hard-earned capital into mutual funds that pool money together into one professionally managed investment every year. In fact, 44.5 percent of American households own mutual funds that invest in stocks, bonds, cash, and other assets. These same Americans should be confident that their money is invested and managed properly.

Mutual funds are highly regulated and led by robustly independent boards. Mutual fund boards differ wildly from corporate boards and their governance concerns are just as diverse. In order to better manage their mutual funds and ultimately the investor’s money, these boards can utilize mutual fund board meeting software that specifically aligns with oversight, strategic decision making, and paperless initiatives.

Investment Company Act of 1940

digital-legal-documentsThe Investment Company Act of 1940 was integral in mutual fund board oversight and is currently the primary federal law governing these entities. Under the Act, all mutual funds are required to have a board of directors or board of trustees. According to the Act of 1940, 40% of mutual fund boards must be independent and cannot have a significant business relationship with the fund’s advisor, principal underwriter, or affiliates in the past or present.

Mutual fund boards, who meet quarterly or more, are often disparate in nature due to their independence and require the ability to engage with board materials and their fellow directors outside of the boardroom. Mutual fund board meeting software is a next-generation tool making this once cumbersome practice of collaboration simplistic.

Mutual Fund Board Meeting Software Promotes Paperless Advisory Contracts

Mutual fund board directors’ duties are slightly different from corporate directors because of the unique structure of the fund. Mutual funds have no employees and the board relies on the advisor, counsel, and committees to run the day-to-day operations. The mutual fund board then focuses on the performance of funds and monitors potential conflicts of interest. Mutual fund board meeting software can help with this oversight, especially in the drafting, finalizing, and approval process of the advisory contract.

One of the most important and rigorous duties of mutual fund board directors is the meticulous review of the advisory contract every year. This document, which sometimes takes an entire year to compile, is carefully crafted to balance a number of considerations including the quality of the services provided by the advisor and the performance of the fund in relation to shareholder opinions. “Directors exercise this responsibility with the utmost diligence and care, often consulting with independent counsel and third party consultants, reviewing hundreds if not thousands of pages of detailed information, and participating in numerous meetings throughout the year,” reports the Independent Directors Council. Mutual fund board meeting software allows these directors to leverage paperless advisory contract creation, management, and approval.board-management-software

Mutual fund board meeting software takes the lengthy advisory contract and makes something that was once a daunting document, a paperless, easily navigable, highly secure electronic book. Directors can use drag-and-drop technology to create key sections, place signature boxes, and attach supporting documentation.

Directors can also collaborate on these documents with mutual fund board meeting software through online and offline access. The ability to make annotations and securely chat regarding clarification, questions, or changes to the contract makes anywhere, anytime access a reality. Because mutual fund board meeting software keeps directors informed and engaged in between board meetings, directors will already have a clear and concise vision of the advisory contract when attending meetings for deliberations. “These meetings allow directors to be informed about the affairs of the fund, ask questions, and deliberate and vote on issues important to the fund and its shareholders,” continues IDC. This further allows directors to negotiate competitive fees with the advisor in the best interest of the shareholders.

Voting and Approvals with Mutual Fund Board Meeting Software

Although mutual funds tend to meet quarterly, a fifth meeting is usually devoted to the approval of the advisory contract. “The process of preparing for that meeting is rigorous and takes several months, if not the entire year,” continues IDC. When a board implements mutual fund board meeting software, the preparation process is not only simplified, but the approval process is also streamlined to make voting and approvals seamless.

Mutual board meeting software integrates electronic voting technology into the certified, secure infrastructure. Directors and administrators can create and vote on a variety of advisory contract components with diverse ballot options that allow for paragraph responses, comment boxes, and document attachment. Directors can vote on their preferred devices in board meetings and view results immediately by count or percentage in a fully flexible results report.publish-votes

Once a unanimous vote passes the advisory contract, military-grade eSignature technology equipped with legal audit trails allows directors to fully approve the contract. Signatories can sign with the tap of a finger, initial, or stylus for quick, legally binding approvals.

Mutual fund board governance often reflects the unique structure of funds. Similar to corporate directors, mutual fund board directors have a responsibility to oversee the fund and fiduciary duty to represent the interests of the shareholders. When these boards choose mutual fund board meeting software to simplify their board practices, directors’ time is better allocated to oversight and meeting the shareholders’ needs, especially when negotiating the advisory contract.


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