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Regulation and Compliance > Federal Regulation > SEC

Pension Consultants Must Identify Conflicts

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More than half of U.S. pension consulting firms or their affiliates are selling services both to pension plans and to money managers on an ongoing basis.[@@]

Officials with the U.S. Securities and Exchange Commission come to that conclusion today in a report based on a look at a sample of 24 pension consulting firms that are registered with the SEC as investment advisors.

Some of the consulting firms studied get a significant portion of their annual revenue from money managers, and a majority have affiliated broker-dealers or relationships with unaffiliated broker-dealers, officials write in the SEC report.

“Although investment advisers owe their clients a fiduciary obligation – including adequately disclosing all material conflicts of interest – some pension consultants appear to have erroneously concluded that they are not fiduciaries to their clients,” says Lori Richards, director of the SEC Office of Compliance Inspections and Examinations. “It is clear from our examinations that many pension consultants must do more to identify conflicts of interest in their activities, and to take steps to mitigate or eliminate those conflicts.”

The mere fact that a pension consulting firm serves 2 masters may create a conflict of interest which could cloud the consulting firm’s objectivity, SEC officials warn.

SEC officials fear that pension consultants may steer clients to hire certain money managers and other vendors based on business relationships rather than on the client’s best interests, officials write.


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