Mutual fund companies and defined contribution plan service providers are making changes to their own 401(k) plans to head off potential trading abuses or to stay ahead of anticipated trading restrictions as the investigation into financial irregularities widens.
Barclays Global Investors, San Francisco, and Putnam Investments, Boston, have either placed trading restrictions or imposed redemption fees on employees who participate in their 401(k) plans, and other providers are expected to follow. Officials at Strong Capital Management Inc., Menomonee Falls, Wis., said they intend to strengthen compliance systems in that company's 401(k) plan.
The fallout from the mutual fund scandal has defined contribution service providers addressing the same fiduciary issues as their clients.
"All of them first conducted an internal review of their own plans to make sure there was no market timing," said Robert Wuelfing, founder and administrator of the Society of Professional Administrators and Record Keepers, Simsbury, Conn. "It's easier to monitor in your own plans than for record-keeping clients."
BGI, which has not been implicated in any investigation into mutual fund trading irregularities, announced that it plans to implement a hard 11:30 a.m. EST trading cutoff for participants in its 401(k) plan starting Dec. 31. (Previously, the cutoff was 4 p.m.) BGI is one of the first to voluntarily implement an early trade cutoff for its participants, according to industry sources, but others are expected to follow.