Three Senate leaders want the Securities and Exchange Commission to broaden agency regulations proposed in June on the advertising and marketing of target-date funds to include funds that are built without mutual funds.
Some custom target-date funds, for example, are constructed by packaging investment options also used in a sponsor's defined benefit or defined contribution plan. In addition, some defined contribution plan sponsors use target date funds offered through bank collective investment trusts or separately managed accounts.
The senators seeking the change are Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee; Herb Kohl, D-Wis., chairman of the Senate Special Committee on Aging; and Michael Enzi, R-Wyo., ranking minority member of the HELP Committee.
“We encourage the SEC to find ways to expand the application of the proposed disclosure requirements, within its authority, to all target-date funds being offered to defined contribution plans,” they said in an Aug. 23 letter to SEC Chairman Mary Schapiro.
The expansion could prove particularly troublesome to firms like BlackRock Inc., Northern Trust Corp. and Bank of New York Mellon Corp., which offer target-date funds through collective investment trusts.
Northern Trust executives had no comment, said John O'Connell, a company spokesman. BlackRock and BNY Mellon executives were not immediately available for comment, according to company spokesmen.
Pension industry lobbyists said they weren't sure what had spurred the lawmakers' letter in particular, although the mutual fund industry's Investment Company Institute, Washington, is lobbying to ensure that all entities offering target-date funds face similar disclosure obligations.
However, ICI officials prefer that the Department of Labor impose the disclosure requirements on target-date strategies not offered by mutual funds.
“To enhance understanding of target-date funds, the same kinds of rules should be imposed by DOL on collective trusts funds, insurance company separate accounts and other non-mutual fund arrangements,” said Rachel McTague, an ICI spokeswoman, in an e-mail response to questions.