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Press Release

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FOR IMMEDIATE RELEASE

CONTACT:
Pecanne Jennings
Chief Marketing Officer
703.516.9300
pjennings@aspa.org

Download the press release as a pdf file

ASPPA LAUDS HOUSE PASSAGE OF MUTUAL FUND REFORM BILL THAT CONTAINS PROVISION PROTECTING THE INVESTMENT RIGHTS OF 401(K) PARTICIPANTS

November 19, 2003 - (Arlington, Va.) – ASPPA congratulates the House of Representatives, Chairman Oxley, Ranking Member Frank, and Subcommittee Chairman Baker, on passage of the Mutual Funds Integrity and Fee Transparency Act of 2003 (H.R. 2420). ASPPA believes that passage of this legislation was a critically important step toward restoring 401(k) participant confidence in mutual fund investments. This is significant because mutual funds represent almost half of 401(k) investments and 36 million American households own mutual funds through a 401(k) plan. As stories about mutual fund scandals are growing more common, 401(k) participants are raising increasing concerns about the security of their retirement benefits. By quickly passing H.R. 2420, the House has sent a strong signal to these working Americans that their concerns need to be addressed.

Most importantly, H.R. 2420 contains a provision that will protect the retirement security of 401(k) participants. This provision would provide the Securities and Exchange Commission (SEC) with greater assurance against late-day trading, without negatively impacting the investment rights of 401(k) participants. According to Brian H. Graff, Esq., ASPPA's Executive Director, “If the SEC adopts the rule currently being considered, it would prevent a substantial majority of 401(k) participants from being able to trade on the same day and get the closing price of that day. By treating these 401(k) plan participants as second-class investors, the rule could seriously threaten their retirement security."

In response to alleged illegal conduct, the SEC is considering a blanket rule requiring that all mutual fund trades be received by the mutual fund company by 4:00 p.m. EST in order to get the closing price for the same day. Once retirement plan recordkeepers and intermediaries receive the trade, it can take up to 6 hours to reconcile and batch the trades for submission directly to the mutual fund company. If the mutual fund company must receive the trade by 4:00 p.m. EST, the retirement plan recordkeeper will be forced to close trading by 401(k) plan participants around 10:00 a.m. EST. In the case of west coast 401(k) participants, this means their right to trade 401(k) plan investments closes at 7:00 a.m. As a practical matter, the rule would force a substantial majority of American 401(k) plan participants into next-day trading status.

The provision contained in section 205 of H.R. 2420 is the most efficient and secure way to prevent late-day trading, and it can be done without negatively affecting the investment rights of 401(k) participants. Sophisticated software systems used by plan administrators can easily be modified to ensure that there is no possibility of manipulation by either the third-party recordkeeper or the intermediary. Each of these systems date and time stamp every trade using an atomic clock, and will be subject to an independent audit under the proposal. Further, these systems are transparent, allowing the SEC to verify that trades are not received after hours. Graff adds that, "It is certainly important to prevent illegal conduct like late-day trading. However, it is critical than any proposed solution not punish 36 million innocent American families who own mutual funds through their 401(k) plan. The solution provided in H.R. 2420 achieves that objective."

For more information about ASPPA, visit our Web site at www.aspa.org. You can also contact ASPPA's government affairs department by calling 703.516.9300.

ASPPA is a national organization of retirement plan professionals dedicated to the preservation and enhancement of the private pension system in the United States. ASPPA offers education and professional credentials for actuaries (FSPA, MSPA), pension consultants (CPC), pension administrators (QPA), 401(k) administrators (QKA), and other benefits professionals (APM). Its 5,200 members provide consulting and administrative support to over half of the private retirement plans in the country.

For more information about ASPPA visit our Web site at www.aspa.org. You can also contact ASPPA’s membership department by calling 703.516.9300 or by faxing an inquiry to 703.516.9308.