Washington,
D.C., May 16,
2005 —
The Securities
and Exchange
Commission´s
Office of Compliance
Inspections
and Examinations
today released
the “Staff
Report Concerning
Examinations
of Select Pension
Consultants.”
The Report follows
an examination
sweep into the
practices of
pension consultants,
particularly
focused on any
conflicts of
interest in
their operations,
and was initiated
as part of the
SEC´s
program to identify
and investigate
risks in the
securities industry.
During its
examination,
SEC staff reviewed
documents and
information
from a cross-section
of 24 pension
consultants
who are registered
with the SEC
as investment
advisers. The
examinations
reviewed: (i)
the products
and services
provided by
pension consultants;
(ii) the method
of payment for
such services;
and (iii) the
disclosure provided
to their clients.
The Report details
the findings,
including:
- More than
half of the
pension consultants
or their affiliates
provided products
and services
to both pension
plan advisory
clients and
to money managers
and mutual
funds on an
ongoing basis;
- A majority
of the pension
consultants
have affiliated
broker-dealers
or relationships
with unaffiliated
broker-dealers
which may
provide a
mechanism
for money
managers to
compensate
pension consultants,
perhaps as
a way to curry
favor with
the pension
consultant;
- Many pension
consultants
have affiliates
that also
provide services
to pension
plan clients;
and
- Many pension
consultants
do not adequately
disclose material
conflicts
of interest
arising from
these practices
to their clients.
Although investment
advisers owe
their clients
a fiduciary
obligation --
including to
adequately disclose
all material
conflicts of
interest --
some pension
consultants
appear to have
erroneously
concluded that
they are not
fiduciaries
to their clients.
The Report
contains recommendations
to enhance pension
consultants´
compliance programs
to help ensure
that the adviser
is fulfilling
it fiduciary
obligations
to its advisory
clients. Office
of Compliance
Inspections
and Examinations
Director Lori
Richards said:
“It´s
clear from our
examinations
that many pension
consultants
must do more
to identify
conflicts of
interest in
their activities,
and to take
steps to mitigate
or eliminate
those conflicts.
We are releasing
this Report
to alert the
pension consultant
community to
these findings,
and, based on
what we found,
we urge pension
consultants
to take a hard
look at their
disclosure and
make improvements.
And, when a
consultant holds
itself out as
providing unbiased,
objective advice,
that obligation
must be met.”
The Report
also raises
important issues
for plan fiduciaries
who often rely
on the advice
and recommendations
of pension consultants
in operating
their plans.
In this regard,
the SEC will
be working with
the Department
of Labor to
educate pension
fund trustees
and other plan
fiduciaries
about the issues
raised by the
findings in
the Report,
and will continue
to work closely
with the Department
of Labor on
issues of mutual
interest.
Source: http://www.sec.gov/news/press/2005-75.htm
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