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SEC Advisory Committee Recommends Changes to Target-Date Fund Rule

The SEC’s Investment Advisory Committee has recommended five changes to the proposed rule on target-date retirement funds issued in 2010.  The recommendations largely center around giving both investors and retirement plan consultants more information about fund risk.  The stated goal of the recommendations is to mandate accurate, easily comparable and objective disclosure that can’t be gamed.  For example, the Committee recommends requiring a glide path illustration for target date funds based on a standardized measure of risk.  In addition, the Committee recommends that prospectuses be required to disclose and clearly explain the policies and assumptions used to attain the target risk level over the life of the fund.

The SEC Advisory Committee is made up of a number of individuals that represent a variety of investor interests.  The Committee’s formation was required under the Dodd-Frank Act and its goal is to advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.