The SEC's new mutual fund disclosure rules could prove costly to 401(k) plan sponsors and participants, who would bear the brunt of added costs incurred by their record keepers.
The new rules, adopted on April 13, require mutual funds to provide more disclosure of the risks of market timing — frequent trading in mutual fund shares — and of their policies regarding such activities. Mutual funds will also have to give more information about times when they provide portfolio holdings information to selected investors and about the use of fair value pricing, to guard against trading that can produce profits for market timers.
"I don't think they're (the new rules) helpful at all. Anything that adds to the cost and expense of what record keepers have to do will raise costs for the funds," said Mel Fleeman, manager of the $255 million 401(k) plan at Tetra Tech Inc., Pasadena, Calif. "If it means record keepers have to upgrade their systems," that will cost defined contribution plans more money.
But Charles Vieth, president of T. Rowe Price Retirement Services Inc., Baltimore, said, "What was announced…by the SEC should not have any effect on record-keeping costs. It just involves mutual funds and their prospectuses."