SEC Authority

   The United States Circuit Court for the District of Columbia has issued an important ruling on the authority of Securities and Exchange Commission to adopt its new rules regulating the mutual fund industry. (Click here for NY Times Story)  The court said the SEC had the power to adopt the new rules, requiring a 75% independent board of directors and and independent chairman, but that the rules were not justified by the investigation of costs and benefits.  All claimed a victory.  The three commissioners, including the departing Chairman Donaldson, said the case vindicated SEC power to pass the rules; the two dissenting commissioners, the Republican nominees, said the case implied that the rules were ill considered.  Since Donaldson is leaving, the court has given his successor, Cox, the opportunity to withdraw or delay the rule -- something he is likely to do. 

This will be the first of many cases in which the business community contests some of the SEC's more radical new rules proposals.