What key responsibility do Boards of Directors or Trustees of mutual funds (MFs) have concerning side-by-side trading?

The key responsibility of Boards of Directors or Trustees of mutual funds concerning side-by-side trading is to provide oversight and receive enhanced reporting on conflicts of interest. This is crucial in ensuring that the interests of mutual fund shareholders are protected, especially when advisers manage both mutual fund assets and separate client accounts.

As side-by-side trading can create conflicts of interest, boards are tasked with overseeing how these trades are executed. They must receive comprehensive reporting that outlines potential conflicts and how they are managed effectively. This oversight helps ensure that advisers are acting in the best interests of the mutual fund shareholders and maintaining the integrity of the fund's operations.

Furthermore, enhanced reporting allows the board to be informed and actively involved in addressing any issues that may arise from these dual accounts, thereby fostering transparency and accountability in the trading practices of the adviser. This responsibility is aligned with the fiduciary duty that boards have to act in the best interests of the fund’s investors.