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Joint SEC and DOL Hearings on Target Date Funds

On May 12, the SEC and DOL announced that they would be holding joint hearings "to explore issues relating to target date or lifecycle funds and other similar investment options." These hearings will be held on June 18 at the Department of Labor, located at 200 Constitution Ave., NW, Washington, DC.

Last week, in an address before the Mutual Fund Directors Forum's Ninth Annual Policy Conference, SEC Chairman Mary L. Schapiro named target date funds as an area in which the Commission would be taking action to help restore investor confidence. In her address, Chairman Schapiro stated that although target date funds have been and will remain very popular, they present a number of regulatory challenges. In particular, she noted that many target date funds base their asset allocation strategies on an assumption that fund investors will ultimately withdraw their investments slowly, maintaining part of their investment while living off the proceeds of what they redeem. She stated that if this is the case, it must be disclosed clearly. She also noted that if this is the case, a particular target date fund might be appropriate for retirement savings, but clearly inappropriate for saving for college in a 529 plan. She strongly reminded directors that they should ensure that disclosure for target date funds was accurate and that the funds' investment strategies were properly aligned with investor expectations, noting that the SEC would be looking at the same issues.

According to the press release announcing the hearings, testimony at the June 18 hearings will "focus generally on issues facing investors in these types of products, and will explore topics such as portfolio composition, risk, and disclosure." Witnesses will include "representatives of plan participants and beneficiaries, plan sponsors, investor organizations, academia and the financial services industry."

More details about the timing and a list of witnesses will be available in the next few weeks.

The full text of the SEC press release announcing the hearings is available at:

Related article:

"Chairman Schapiro's First Address to the Fund Industry," May 4, 2009