The SEC is examining the use of revenue-sharing arrangements by 401(k) plans and mutual fund managers, according to a client alert from defined contribution consultant McHenry Consulting. The alert details a sweeping SEC examination targeting industry compensation practices in the distribution of defined contribution plan products and services. The alert included 25 questions sent to mutual fund companies by the SEC over the last several weeks, seeking in-depth information about compensation practices of defined contribution plans and their providers, including mutual fund companies. The SEC has also asked fund companies to provide details about payments made to the "top 25 DC plans" during the period under review, according to the alert.
"We're looking into payments by funds and their advisers to 401(k) plans, plan consultants and plan platforms. We want to better understand the nature and purpose of these payments, including whether they are reimbursements for plan expenses or payments for shelf space or some other purpose. We are also asking why these funds are included in particular 401(k) plans," Lori Richards, director of the SEC office of compliance inspections and examinations, said in a statement.
Nancy Fisher, Putnam Investments spokeswoman, confirmed that the firm has received the list of questions from the SEC and said the firm is cooperating with the investigation. Information was not available concerning which other firms are being examined by the SEC.