SEC Commissioner Says Simplified Disclosure Document Will Help Retirees Make Investment Decisions

Roel Campos, the Securities and Exchange Commissioner says that he is working on a campaign to create a simplified, prospectus-like disclosure document that would give investors clear, concise information about the performance and cost of their retirement plan assets.

Campos said it was a “given” that retirees would be on their own when managing their retirement funds because Corporate America was continuing to move away from defined benefit funds. Because of this, Campos said that retirees needed to obtain performance information so they could effectively manage their accounts. In order to do a good job managing their own investment funds, however, retirees need information about costs they are paying based on their investment decisions.

The retirement plans are subject to ERISA, and because of this, the SEC will be working with the Labor Department, which is in charge of administering the 1974 Employee Retirement Income Security Act, to implement the commission’s initiative.

Campos says that the initiative has two parts. The first one is a short-form prospectus for mutual funds instead of a complete prospectus. The second component will look at whether rule changes under ERISA should be made that would allow similar summary information to be made accessible to all retirement investors participating in mutual funds and other kinds of pooled investment vehicles sponsored by insurance companies and banks.

According to Campos, the Labor Department is committed to working with the SEC on these matters. After joint discussions, the commission will suggest that its summary prospectus be the framework for the summary disclosure document that will be utilized by all pooled retirement fund investors. If the DOL agrees, the SEC will work towards finalizing the summary prospectus. The DOL would also make its own rules. The ultimate purpose is to create a system that would allow retirees to have the information they need to successfully manage their retirement funds. Campos sees this as an ultimate “win-win for investors and for our entire capital markets system.”

This is interesting. The SEC wants to act as if they are doing something for elderly investors. What they are actually doing is the opposite by setting out the required information that has to be disclosed to investors – the “small print.” Brokerage firms can then exempt themselves from liability by placing this language in their investment information. If a firm places “warnings on a label,” it can later be argued the warning was not sufficient. However, if the government tells firms about what they have to say in the warning, then it cannot be later claimed the warning was insufficient. The current SEC directors, selected by the Bush/Cheney administration, are “owned” by Wall Street and are doing everything they can to help their friends.

Shepherd Smith and Edwards is a law firm dedicated to protecting investors by helping them recoup any losses incurred due to the misconduct of members of the securities industry. Shepherd Smith and Edwards offers a free, first consultation to all prospective clients who reach us via the Internet, so contact us today.

Employee Retirement Income Security Act – ERISA, US Department of Labor
U.S. Department of Labor

For Seniors,