Press Release
Concern Expressed That 4:00 p.m. Hard Trade Cut-off Could Hurt Plan Participants
WASHINGTON, DC, December 3, 2003 -- In reaction to today's announcement that the Securities and Exchange Commission (SEC) approved proposed regulations that will require a "hard and fast" 4:00 p.m. Eastern Time (ET) trade cut-off for mutual funds, the American Benefits Council, which represents more than 250 major employer plan sponsors and service providers that provide benefits to over 100 million Americans, released the following statement from its President James A. Klein:
"At a time when Americans are trying to save for their retirements, we are disturbed that the SEC has proposed a rule that disadvantages retirement plan investors. By insisting on a hard and fast 4:00 p.m. trade cut-off, this rule would penalize 401k and other retirement plan participants over other investors due to the processing procedures required for retirement plan transactions. Workers and retirees will now be sliding backwards from today's ability to protect their retirement assets immediately, like any other investor, to as long as a three day wait for 401k trades to be processed. Other investors, however, who place their transactions directly with a mutual fund provider will see little if any change to current trading practices", Klein said.
"The SEC appears to have ignored the virtually unanimous bipartisan action by the House of Representatives just two weeks ago to ensure that retirement plan investors are not harmed by any SEC rule to crack down on illegal late trading," Klein said. On November 19, the House of Representatives approved the Mutual Funds Integrity and Fee Transparency Act (H.R. 2420) by a vote of 418-2. H.R. 2420 has specific language, added by Representatives Richard H. Baker (R-LA) and Michael G. Oxley (R-OH), designed to address the retirement plan industry and other third party intermediary concerns. The language directs the SEC to issue rules to prevent after-hours trading but states the rules are to include an exception for broker-dealers, retirement plan administrators and other intermediaries if the intermediaries use procedures that are designed to prevent after-hours trading. The procedures would be subject to an independent annual audit to ensure that these procedures do not permit the acceptance of trades after the close.
Klein concluded, "The Council fully supports the SEC's determination to stop illegal trades that may have already hurt countless investors. But we see no reason not to take advantage of technology in order to level the ‘playing field' appropriately for all investors. Automatic electronic time stamps, which can be independently audited, would provide the answer the Commission seeks — no further trades made or cancelled after 4:00 p.m. Eastern Time — and allow all investors an equal chance to make the investment trades they wish."
The American Benefits is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
