Nine months after being hit by its worst scandal in 60 years, the US mutual fund industry has suffered a major regulatory defeat which will see them forced to appoint independent chairmen to their boards.

The Securities and Exchange Commission on Wednesday voted by three to two to pass the first and most contentious of the 16 reform packages planned for the $8,000 billion mutual fund industry.

The plan to require independent chairmen was strongly opposed by almost the entire industry, and was passed despite a last-minute lobbying push by industry heavyweights such as Fidelity.

An estimated 80 per cent of fund boards are chaired by fund executives or owners. Fidelity, the biggest mutual fund company with almost $1,000bn under management, has all of its 292 funds chaired by Ned Johnson, whose family owns the company. Under the rule, he will have to step down as chairman from each one.

Vanguard, the second biggest fund group which is usually outspoken in its support of corporate governance, also opposed the proposal, splitting from its founder, Jack Bogle, who supported the plan.

Fund companies on Wednesday were muted in their response, saying that they would follow the law. Most said an existing independent director would probably step into the chairman’s job, rather than hiring a new person outside. The existing chairman would not leave the fund, but step down to be a director.

Herb Allison, the chief executive of TIAA-Cref, the only fund to support the plan, said the vote was “a major victory for the investing public”.

“It also recognizes the inherent conflict of interest between fund investment managers, who profit from investor fees, and fund investors, who benefit from independent oversight,” he said.

Each mutual fund is already required to have its own board, with the idea being that the board appoint and oversee the investment manager for the fund. In reality, the board of a Fidelity mutual fund, for example, is highly unlikely to fire Fidelity as the investment manager.

Other reforms passed on Wednesday, which were not opposed by the industry, included the requirement that 75 per cent of fund directors be independent; that the fund board be able to hire its own staff, and that the board provide reasons for its choice of investment manager.

Paul Roye, the director of investment management at the SEC, said that the changes were needed to shore up investors’ rights in the wake of the fund scandal. He said the SEC had in the past few months brought three cases against inside chairmen who were actively involved in frauds against their funds.

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