We have posted a number of blogs and otherwise written over the past year discussing the growing role of the SEC in the retirement plan market. See, especially, the article on the SEC’ sand DOL’s "Cross Agency Waltz." The ERISA sessions at the National Society of Compliance Professionals, at which I spoke, were particularly well attended.

The fact that the DOL and the SEC held their first ever joint hearings in June, reviewing target date funds, is further evidence of the SEC’s continued interest in a field which has been traditionally dominated by the Treasury and Department of Labor.

The SEC’s rules have always had particular applicability to the 403(b) marketplace. But the SEC also has leverage into the 401(k) market, a market which often pays scant attention to the agency. in addition to the SEC’s  authority to regulate registered investment products,  a participant’s interest in a 401(k) plan is still, legally, a "security" under its jurisdiction. 401(k) plan interests  may be exempted from the registration and filing requirements of the ’33 and ’34 Acts, but they ARE NOT exempted from those laws’ anti-fraud provisions. So, the agency has every right to investigate fraudulent activities related to the provision of 401(k) plans to plan participants. This is particularly why last year’s  Memorandum of Understanding between the SEC and the DOL-promising cooperation at the investigation and enforcement level- becomes so critically important to retirement plan consultants and practitioners. It will be interesting to see what level of SEC/DOL cooperation we see coming out of the DOL’s Consultant and Adviser Program, which is investigating abusive practices of pension advisers.

This is all reinforced by an October 22, 2009 speech to the AARP by Mary Schapiro (Chair of the SEC), reported in BNA Pension and Benefits Daily. Here is an excerpt from that speech which really puts the retirement plan community on notice:


"In my view, financial service firms should engage in responsible product development in the retirement market. Barraging investors with retirement products that feature the latest financial gimmick or marketable fad will not ultimately serve investors’ interests.

America’s future retirees deserve products that they can understand and evaluate. This means that complex fee arrangements or product descriptions should be discarded in favor of simple, clear disclosure.

Our future retirees should have access to products that will help them meet their retirement goals without imposing inappropriate risks. Products offering enhanced leverage and avant-garde investment techniques may be appealing to those investors that want to speculate. But they are not the type of investment products that belong in the retirement portfolio of the average American seeking to provide for security in retirement.

In addition, extolling the eye-popping results of the short-term performance of certain investment products, without focusing on the long-term implications or risks, can result in disappointed investors and potentially angry plaintiffs — not to mention an SEC prepared to be aggressive in enforcing the investor protection rules.

These types of disclosure, product development and marketing issues surrounding retirement products will be areas of focus in the coming year for those of us at the SEC. The burden imposed on those investing for retirement is significant, especially after the market events of last year and we must be committed to assisting those investing for retirement."



 If you didn’t believe it before, you probably really need to take notice now. The SEC is very interested in your world.


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