<nobr>Jun 22, 2010</nobr>

SEC Releases Proposed Target Date Fund Rule

The Securities and Exchange Commission on June 18 released a proposed rule that would modify the rules that apply to advertising and marketing by mutual funds related to target date fund products (TDFs). The Commissioners on June 16 voted unanimously to propose the new rules.

Highlights of the rule include:

• A TDF with a target "date" in the official name of the fund would need to include information disclosing the fund's asset allocations among investment types (i.e., equity, fixed income, etc.);


• Marketing materials would need to include a table, chart, or graph depicting asset allocations over the fund's entire life and clearly state that asset allocations change over a stated number of years before a fund's "landing point";


• The fund's asset allocation at the "landing point" would also need to be disclosed;


• Marketing materials would need to include disclosures that fund investments are not guaranteed and direct investors to consider their own risk tolerance, personal circumstances and other financial factors accordingly; and


• Marketing materials would be considered misleading (under anti-fraud guidance) if TDFs are referred to as "simple" and/or requiring "little or no monitoring."

Comments to the SEC are due within 60 days after publication in the Federal Register (expected this week).

The Department of Labor and the SEC last month released an advisory bulletin that seeks to help investors and plan participants better understand the operations and risks of target date fund investments. The DOL and SEC, as well as the Senate Special Committee on Aging, have been examining target date funds over the past year, and have been contemplating new rules and regulations.

ERIC in connection with a joint hearing held in June 2009 by DOL and SEC submitted comments saying that there is no need for additional regulations or guidance under ERISA aimed at target date funds.

Questions or comments on this issue should be addressed to Kathryn Ricard (kricard@eric.org).

SEC Press Release

Proposed Rule

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