SEC to Propose New ‘Target-Date’ Fund Rule

The Securities and Exchange Commission will examine the risk exposure and marketing of target-date funds in the coming year, SEC Chairman Mary Schapiro told the Practising Law Institute Friday.

“Not all target-date funds are created the same, and some with very near-term target dates lost substantial amounts of investors’ money in 2008,” Schapiro said. “In the year ahead, we are going to confront the issue of the potential for target-date fund names to confuse investors, or lull them into a false sense of security. I have asked the staff to prepare a rule proposal to provide additional information to investors when a fund includes a date in its name.”

The SEC is also concerned that some target-date funds promote a “set-it-and-forget-it mentality—which is concerning,” she added. “Given the growing prevalence of these funds as retirement tools, this is an initiative that will have a real impact on everyday Americans.”

She added: “The past year has witnessed one of the most significant rule-making agendas in years—an agenda that shows we are willing to address challenging issues and make the tough choices. The year ahead will be no different.”