Practice

NEW YORK - Regulatory officials are pondering significant changes to the way the U.S. oversees financial markets in the wake of last year's credit crisis and the failure to prevent Bernard Madoff's massive Ponzi scheme, but lawmakers will have to make some hard choices before any real changes can happen.

At the Securities and Exchange Commission's roundtable last week on how to regulate the multi-trillion-dollar securities lending industry to avoid a repeat of the billions of dollars lost in the credit crisis, the focus was on conservative investment of cash collateral and a clearinghouse to create transparency, reduce spreads and keep stock pricing efficient.

NEW YORK - Despite their sinister-sounding name, dark pools of liquidity can be very beneficial to average investors by offering mutual funds and large institutional investors an efficient way to make large trades without impacting the market.

If there is anything positive to be gleaned from the financial crisis, it is that 401(k) plan designs need to be revised so they are more resistant to extreme volatility and market downturns, Putnam Investments CEO Robert L. Reynolds told executives at the National Investment Company Service Association’s East Coast Regional Meeting in Boston.

Noting that 15% of 401(k) participants have engaged in some form of “leakage,” that is, hardship withdrawals from their plans or failure to roll the money over when changing jobs, between 1998 and 2006, the Government Accountability Office is recommending that Congress eliminate the ban on additional contributions for six months by those who make such withdrawals.

A provision by the Internal Revenue Service that permits people age 70-1/2 or older to contribute up to $100,000 of their IRA money to a charity each year without tax consequences is slated to expire at the end of the year.

Wholesale changes are in store for both pension and 401(k) plans, according to a survey of 140 financial executives by Prudential Financial. Nearly half of the execs at companies with pension plans said their firms were considering freezing or terminating their pension plans in the next two years. Seventeen percent have already closed their DB plan to new entrants, and 27% said they are likely to do so in the next two years.

When the Roman Empire was first expanding, regulators noticed an annoying problem: Due to increasing traffic, chariots were leaving grooves in the stone roads, but the gauge - the distance between the wheels - varied according to region. Different sized chariots didn't fit in the grooves. Julius Caesar had a solution: international standardization.

For the past year, investors have been nervously avoiding stocks and pumping billions of dollars into bonds and bond mutual funds, but a new study indicates that a large percentage of investors may have a limited understanding of how bonds work.

Fidelity has adjusted the holdings in its Freedom Fund lifecycle line as well as other asset allocation portfolios to include more international stocks, commodities and TIPS. International exposure throughout all of the Freedom Funds will rise from an average of 20% to 30%, with exposure to U.S. stocks falling commensurately.