The Securities and Exchange Commission has stated in a recent no-action letter that mutual fund boards can rely on written quarterly chief compliance officer reports affirming that transactions relating to affiliated underwriting, cross-trades and affiliated brokerage comply with applicable rules.

The agency’s Investment Management Division stated in its no-action letter, which reverses a previous 2010 position, that it agreed that the request by the Independent Directors Council “is consistent with the commission’s approach in adopting Rule 38a-1 and would allow boards to avoid duplicating certain functions commonly performed by, or under the supervision of, the CCO.“

The Independent Directors Council’s request sought “to better align the [fund] director responsibilities under the Exemptive Rules with the oversight role that the commission has assigned to fund boards with respect to compliance under Rule 38a-1″ under the Investment Company Act.

The no-action letter approval will also allow fund directors “to focus on conflict of interest concerns raised by affiliated transactions, including whether a fund engaging in the types of affiliated transactions permitted by the Exemptive Rules is in the best interest of that fund and its shareholders,” IM said.

Cipperman Compliance Services opined that the “position reflects the reality of how most funds operate. The board has very little ability to perform due diligence independent of the work performed by the chief compliance officer, so it makes sense to rely on the representations.”

However, Cipperman said, “the big open question is whether this position increases CCO liability, thereby creating additional due diligence requirements.”