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Regulation and Compliance > Federal Regulation > SEC

SEC Proposes Enhanced Target-Date Fund Disclosures

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The Securities and Exchange Commission (SEC) proposed rules on Wednesday, June 16, seeking to provide investors with enhanced information about target-date funds. “Today’s rules would help to clarify the meaning of the date in a target-date fund and improve the information provided when these funds are advertised and marketed,” said SEC Chairman Mary Schapiro in her opening remarks before the vote. The SEC voted 5-0 to propose the rules for a 60-day comment period.

“Among other things, the proposed rules would enable investors to better assess the anticipated investment glide path and risk profile of a target-date fund by, for example, requiring graphic depictions of asset allocations in fund advertisements,” Schapiro continued. “The rules also would require an asset allocation ‘tag line’ adjacent to a target-date fund’s name in an advertisement.”

According to the SEC proposal a target-date fund that includes the target date in its name must disclose the asset allocation of the fund among types of investments–such as equity securities, fixed income securities, or cash–and the asset allocation would need to appear with the funds name the first time the fund’s name is used.

The agency also proposed that marketing materials that are in print or delivered electronically must include “a prominent table, chart, or graph that clearly depicts the asset allocations among types of investments over the entire life of the fund.”

The SEC said that target-date fund marketing materials would also be required to include a statement asking investors to assess their risk tolerance, personal circumstances, and complete financial situation when investing in target-date funds; state that an investment in the fund is not guaranteed and that it is possible to lose money by investing in the fund, including at and after the target date; and whether, and the extent to which, the intended percentage allocations of a target-date fund among types of investments may be modified without a shareholder vote.

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