Bill to protect mutual funds' directors gains

Senate measure has retroactive provisions

March 07, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

The Maryland Senate approved a bill yesterday to increase mutual fund directors' protections against lawsuits, rejecting opponents' arguments that its retroactive provisions unfairly seek to influence a pending lawsuit.

The Senate voted to pass the measure, which the Maryland State Bar Association had criticized as a "snake," by a 36-12 margin. Last week, senators rejected by a 24-22 vote an amendment stripping the retroactive provision.

A "snake" is generally defined as an obscure piece of legislation, usually little understood by members and crafted to benefit a particular special interest. The bar association opposes retroactive legislation.

The bill was heavily supported by the mutual fund industry, including Baltimore's T. Rowe Price Associates and Legg Mason Inc.

If approved by the House of Delegates, the bill would re-enact legislation the General Assembly passed in 1998 and 2000 to rewrite the standards for suing directors of mutual funds. Both times, the legislature backdated the changes to Jan. 30, 1998

The state Court of Appeals struck down the 1998 law and is considering a challenge to the 2000 statute on procedural grounds.

Sen. Walter Baker, chairman of the Judicial Proceedings Committee, said the bill was simply an "insurance policy" making sure the law remains in effect. The Cecil County Democrat denied that the bill was designed to affect a lawsuit brought by a Rockville money manager against a Florida mutual fund company that is chartered in Maryland.

Sen. Brian E. Frosh, a Montgomery County Democrat, led the opposition to the bill, both on the retroactivity provision and its underlying merits. Frosh, who insisted that there was no explanation for the retroactivity provision except to influence the lawsuit, contended that the legislation would tip the legal scales too far in favor of directors and against shareholders.

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