Grassley, Baucus Urge Fair Treatment for Retirement Plan Participants
Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, have urged the Securities and Exchange Commission to consider the impact of a proposed mutual fund reform on retirement plan participants.
In a letter to the Securities and Exchange Commission this week, Grassley and Baucus praised the commission's well-intended efforts to clean up mutual fund abuses. They said one of the commission's proposed rules might inadvertently harm retirement plan participants. The commission's proposed rule barring mutual fund trades after 4 p.m. would give investors who trade directly with mutual funds or the funds' primary transfer agents a distinct advantage over retirement plan participants, whose trades take longer to process. The impact would be even harder on retirement plan investors in Western states dealing with East Coast stock markets.
"For a lot of Americans, their retirement plan is the only investment they'll ever have," Grassley said. "They don't have a lot of loose change. Every dollar they can spare goes into their retirement account. It's only fair for them to be on equal footing with every other investor."
Baucus said, "As the baby boom generation heads toward retirement, it is becoming even more essential that retirement investments are protected and receiving the same advantages as other mutual fund investors. To protect today and tomorrow's retirees, as well as the next generation, I urge the SEC to rethink their proposal so it works for all investors."
The text of the Grassley-Baucus letter to the Securities and Exchange Commission follows.
March 29, 2004
The Honorable William H. Donaldson
Chairman, Securities and Exchange Commission
450 Fifth Street, NW, Room 6000
Washington, DC 20549
Dear Chairman Donaldson:
We are writing to commend the Commission for its efforts to address abuses that have occurred at a number of mutual fund companies – including the practice of "late trading" in mutual funds, which violates current law and unfairly advantages some mutual fund investors over others. We believe that a strong response from the Commission to the shameful events that have occurred at some fund companies is a critical step to restoring investors' confidence in the integrity of our financial system. We encourage you to continue your efforts to expose and punish those who have abused their positions of trust and authority to do wrong.
While we commend the Commission's actions with respect to the mutual fund abuses, we are concerned that retirement plan participants could be inadvertently harmed by one aspect of the Commission's proposed rules issued in response to late trading. Under the proposed "hard 4 p.m. deadline" rule, investors who trade directly with mutual funds or the funds' primary transfer agents will have a distinct advantage over retirement plan participants, whose trades are typically processed by plan administrators or other third-party intermediaries. At a minimum, retirement plan investors will face earlier trading deadlines in order that plan administrators may perform the various administrative and required compliance functions prior to submission of the orders to the fund by 4 p.m. These deadlines will be set even earlier in the day for retirement plan investors in more Western regions of the United States given the time zone differential with the east coast-based stock markets. The effect will be the end of same-day execution of trades for many retirement plan investors, and more complex trading orders may stretch over several days.
American investors have already been harmed by improper trading practices at mutual fund companies. Most Americans hold a large portion of their financial investments through their retirement plans, and we believe it is important to ensure that ordinary Americans are not harmed again through the issuance of rules designed to protect them.
Thank you for your consideration of these important issues for retirement plan investors. We look forward to working with the Commission on these and other mutual fund reform issues in the months ahead.
Sincerely,
Charles E. Grassley
Chairman
Max Baucus
Ranking Member
cc: Commissioner Paul S. Atkins
Commissioner Roel C. Campos
Commissioner Cynthia A. Glassman
Commissioner Harvey J. Goldschmid
Ann Combs, Assistant Secretary of Labor, Employee Benefits Security Administration
