WASHINGTON — Officials at Putnam Investments, Fidelity Investments, INVESCO Funds Group Inc. and AIM Advisors Inc. confirmed the Labor Department has contacted them as part of a broad investigation of fees, fee disclosure and compensation arrangements among service providers to 401(k) plans.
"We are looking at a number of issues, including whether fiduciaries are accepting improper payments for directing investments, whether fiduciaries have used plan accounts to facilitate late trading/market timing of other clients, and whether plans have incurred losses as a result of fiduciaries knowingly directing investments to mutual funds or pooled accounts which permitted late trading or market timing," said Assistant Labor Secretary Ann Combs.
The Labor Department also is examining indirect fees and compensation arrangements between investment companies and retirement plans. Those would include directed brokerage fees, "pay to play" and revenue-sharing arrangements, which permit retirement plans to pay record-keeping and custodial expenses indirectly from the 12(b)-1 distribution and marketing expenses charged by some mutual funds.
The Securities and Exchange Commission is conducting its own investigation of 401(k) plan costs (see related story on page 4). It has been taking a hard look at 12(b)-1 fees and is expected to tighten or eliminate these fees, which were originally intended to help mutual fund companies defray the costs of sales and distribution.