The SEC on Wednesday issued several proposals to beef up agency rules governing the advertising and marketing of target-date retirement funds.
One proposed rule would require marketing materials that include a target date in the fund’s name to include a tagline disclosing what the fund’s asset allocation will be at the target date.
Another proposal would require marketing materials to include a table, chart or graph that depicts the asset allocations among types of investments over the life of the fund. “These proposals would also require that the table, chart, or graph be immediately preceded by a statement explaining that the asset allocation changes over time, noting that the asset allocation eventually becomes final and stops changing, stating the number of years after the target date at which the asset allocation becomes final, and providing the final asset allocation,” according to an SEC fact sheet on the proposals.
The SEC also proposed to require target-date fund marketing materials to state that a target date should not be selected based solely on age or expected retirement date. In addition, fund disclosures would have to point out that the target-date fund is not a guaranteed investment.
During an SEC meeting Wednesday, SEC Chairwoman Mary Schapiro said that a review by agency staff had revealed the equity exposures of funds with the same dates ranged from 25% to 65% at their target dates. Even at the fund’s landing point — that is, when the fund reaches its most conservative point and stops adjusting its asset allocation — the equity allocations of funds with the same target date ranged from 20% to 65%, Ms. Schapiro said.
“It is clear that investors need more information than just the date in a fund’s name,” Ms. Schapiro said at the meeting. “They need context in order to evaluate what the date means and what the fund’s projected investment glidepath is.”
The public will have 60 days to comment on the proposals after publication in the Federal Register, according to John Heine, an SEC spokesman. Publication is expected “as soon as possible,” Mr. Heine added.