The SEC is targeting pension fund consulting firms in a sweeping examination of practices, compensation arrangements and disclosure, including alleged "pay to play" conflicts of interest in which recommendations by pension consultants of money managers and investment classes are based on financial incentives, not on performance. Its "special fact-finding review" of the consulting industry is a first by the SEC, said Lori A. Richards, director of the SEC's Office of Compliance Inspections and Examinations, who sent letters to investment consulting firms seeking detailed information.
"We're looking at a selection of consultants, certainly the largest firms and some others," she said. She declined to identify the firms or say how many consultants received the letter. Mercer Investment Consulting, Frank Russell, Segal Advisors, Strategic Investment Solutions, Summit Strategies Group, Watson Wyatt Investment Consulting and Wilshire Associates were among the firms that received the letter from the SEC, officials at the firms confirmed. Pay to play "is an area of concern," Ms. Richards said. "I think we were motivated by trying to get to the bottom of these allegations." She said it is too early to tell what may result from the findings.