"Some mutual fund boards are aware of the issues," he said, "but many others are not very aware at all."

And while the law requires only that 40 percent of a fund's board be independent, in practice they constitute a majority on nearly all fund boards.

Both transactions, Mr. Maione said, may have come about because some board members from the club also served on the library or fund boards.

In some cases the chairman of a mutual fund board owns the management and subadviser firms or has deep connections with them.

Until now, mutual fund boards have largely consisted of executives of the fund's management company.

It said it had taken numerous steps to make sure mutual fund boards have adequate information about service providers.

Greed is good, remember - anyway you're still on your hedge fund board aren't you?

The other rule required that at least 75 percent of directors, including the chairman, on mutual fund boards be independent from the fund sponsor.

You need to have some independents, but I would encourage fund boards to have people from inside as well.

In general, I think the best solution for the industry is a higher level of responsibility for fund boards.