ICI Supports New NYSE, Nasdaq Corporate Governance Standards

Washington, DC, December 3, 2003 - The Institute supports changes to corporate governance standards proposed by the New York Stock Exchange and Nasdaq Stock Market, Inc. that will serve to enhance the interests of investors by improving the governance structure of listed companies and the integrity of financial reporting. The SEC simultaneously approved the proposals on an accelerated basis.

Background
According to the NYSE, the NYSE Corporate Governance Proposal is designed to further the ability of honest and well-intentioned directors, officers, and employees of listed issuers to perform their functions effectively. The NYSE believes that the proposal also will allow shareholders to more easily and efficiently monitor the performance of companies and directors in order to reduce instances of lax and unethical behavior. According to Nasdaq, the purpose of the Nasdaq Independent Director Proposal is to provide greater transparency regarding certain relationships that would preclude a board of directors from finding that an individual can serve as an independent director, and to increase the role of independent directors on board committees. In Nasdaq's view, the proposal is intended to enhance investor confidence in the companies that list on Nasdaq.

ICI Position
In a recent comment letter, the Institute expresses support for the approach taken in the proposals that recognizes that investment companies are already subject to pervasive federal regulation.

In addition, the Institute commends the NYSE and Nasdaq for making similar proposals that are also very similar to analogous provisions in the American Stock Exchange rules recently published for comment by the SEC. Such a coordinated approach ensures that the self-regulatory organizations do not compete on the basis of differences in their rules, encouraging a "race to the bottom" to attract new listings, to the ultimate detriment of investors.

The Institute recommends that an NYSE requirement regarding audit committee members be tailored for closed-end investment companies by treating a "fund complex" as one company.

The Institute also recommends excluding investment companies from the NYSE's proposed requirement that audit committee members discuss earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies.

Related Links
A section of this website is devoted to the Institute's efforts for improving the corporate governance of all companies, including mutual funds.