Securities and Exchange Commissioner Luis Aguilar faulted the regulator Thursday for not strengthening municipal bond disclosures.
Aguilar chided the commission for not adopting enhanced disclosure recommendations in a 2012 SEC study including more details on initial offerings such as the starting price, better ongoing disclosures and making disclosures easier to understand.
He said the SEC has an obligation to investors to heighten timely access to accurate, useful and high-quality disclosures for a variety of investment products, particularly those popular and vital for retirees.
Among the investments he cited are target-date funds.
“With the end of an historic period of low interest rates rapidly approaching, the consequences of investors continuing to be ill-informed about the inherent risks of target-date funds are simply too grave,” the Commissioner said.
Aguilar’s comments came at the American Retirement Initiative’s Winter 2015 Summit in Washington, D.C.
Commissioner Aguilar Faults SEC For Not Strengthening Muni-Bond Disclosures
February 5, 2015
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I hope that when Aguilar talks about target date fund "investors" that he means plan sponsors, because they are the ones who choose TDFs and they have a fiduciary responsibility to understand TDFs, a duty they're breaching. For the most part, individuals don’t choose target date funds; employers choose TDFs on behalf of defaulted participants who can’t or won’t make an election. The biggest problem with target date funds is that fiduciaries are not vetting their TDF selection. More than 60% of TDF assets are with the Big 3 – Vanguard, T. Rowe Price, and Fidelity. The problems are 2-fold: fiduciaries are breaching their duty of care so they’ll probably be sued eventually, and beneficiaries are exposed to horrific risk at the target date. 2010 TDFs lost more than 25% in 2008, and they’ve become riskier since, so there’s a bigger loss waiting to happen.