More onerous regulatory requirements may be leading advisors to close or merge smaller funds, say lawyers at Thorp Reed & Armstrong. If the Pittsburgh-based law firm's findings are true, they would reaffirm the fear of many smaller shops that independent director and compliance officer requirements would price them out of the industry.

Thorp Reed & Armstrong examined SEC N-8 filings made by fund firms and counted 250 cases of funds closing or merging with other funds through August of 2005. That was a sharp increase from the 69 mutual funds that closed or merged during the same period in 2004, according to the firm.

Many of the filings referred to the costs of complying as a reason for the action, according to the study. Small fund firms are less able to afford a compliance officer or to pay independent board members.  

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