DOL Investigating Funds and Service Providers For Trading Violations
The U.S. Department of Labor is conducting a review of trading practices by mutual funds, bank collective trusts, and other pooled vehicles, as well as fund service providers and intermediaries, to determine whether last yearís market timing and late trading abuses involved any violations of ERISA.
"Under ERISA, a retirement plan fiduciary that engages in or facilitates market timing or late trading, and causes losses to the plan, is liable to restore losses to the plan," said Ann Combs, assistant secretary of DOLís Employee Benefits Security Administration in a recent speech. "We are examining a sample of mutual fund and other financial institutions to see whether such activities have harmed retirement plan beneficiaries."
Combs said the investigation is focusing primarily on funds and banks that offer 401(k) services to plans, rather than on plan sponsors. "We are looking for improper compensation arrangements between mutual funds and brokers who are fiduciaries and whether financial institutionsí own retirement plans have been involved in market timing or late trading," she said. She categorized the review as mostly "exploratory" and not the result of specific evidence of improper or illegal activity by plan fiduciaries.
"We donít know yet if there are significant problems here," said Combs.