More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Department of Labor’s Employee Benefits Security Administration (EBSA) has released its proposed rule on ways to help workers better understand targe-date funds.
EBSA says that the proposed rule would amend the “qualified default investment alternative (QDIA) regulation” and the “participant-level disclosure regulation” to provide more specifics to participants and beneficiaries about investments in target-date funds. Comments on the proposal are due to EBSA by Jan. 14.
Patrick Cunningham (left), CEO of Manning & Napier Advisors, welcomes the EBSA's proposed rule and applauds the rule's requirement that fund companies provide their glide path, which is the asset allocation mix of a fund based on the number of years to the target date. Also, under the proposal, "plan sponosrs and their advisors and consultants will have a much better understanding of at what piont does [the fund] get to its most conservative positioning; fund providers had such different ways of approaching it."
The proposed amendments, EBSA says, require new disclosures about the design and operation of target date or similar investments, including an explanation of:
- The investment’s asset allocation.
- How that allocation will change over time, with a graphic illustration.
- The significance of the investment’s “target” date.
The proposed amendments also require a statement concerning the risk that a participant investing in a target-date fund may lose money in that investment, even close to retirement.
Phyllis Borzi (left), assistant Secretary of Labor for EBSA, said in a statement that based on EBSA’s collaborative examination with the Securities and Exchange Commission (SEC), “it is clear that all participants in participant-directed individual account plans can benefit from better information about how target date investments are designed to meet their retirement savings needs.”
The comment period for the SEC's proposed rules regarding target-date funds closed on Aug. 23, with the Commission receiving only 44 comments.