SEC Names Merrill Lawyer to Run Mutual Fund Oversight Division

The Securities and Exchange Commission on Monday named Andrew Donohue, general counsel at Merrill Lynch Investment Managers, to head the agency’s division that oversees mutual funds and investment advisors.

The appointment of Donohue, who also is a member of the board of governors of the fund industry’s chief trade group, the Investment Company Institute, will fill one of four major SEC posts that have been empty.

As head of the investment management unit, Donohue will replace Paul Roye, who left the agency last year to work for Los Angeles-based Capital Research & Management Co., parent of the American Funds group.

SEC Chairman Christopher Cox said Donohue, 55, brought three decades of experience with fund regulation to the SEC’s investor-protection mission. “I know that he is committed to promoting effective mutual fund governance, sturdy compliance and plain-English information for mutual fund and ETF [exchange-traded fund] purchasers,” Cox said in a statement.

At Merrill Lynch Investment Managers, Donohue oversees the firm’s legal and regulatory compliance for more than $500 billion in assets, including mutual funds, hedge funds and private equities. The firm is the fund management division of brokerage Merrill Lynch & Co.

Donohue helped draft a letter to the SEC in 2004 criticizing an agency proposal requiring that mutual funds have an independent chairman.

The letter, from the New York City Bar Assn.’s committee on investment management resolution, said the proposal “would constitute an unprecedented intrusion on the internal processes of boards of directors and upset the careful balance between state corporate law and federal law.” Donohue was one of the five committee members who drafted the letter.

Last week a U.S. appeals court in Washington for the second time set aside the proposed rule, pushed through by Cox’s predecessor, William H. Donaldson. The court, saying that the SEC didn’t follow federal rulemaking guidelines when it evaluated the cost of the regulation, suspended its decision for 90 days, giving the SEC time to comply.

Cox still must pick a new director for the SEC’s division of market regulation. The job of chief SEC accountant also is open, as is the chairmanship of the Public Company Accounting Oversight Board, the government’s audit-industry watchdog.