Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, June 16, 2010

SEC Approves Amendments to Clarify Target Date Retirement Funds

The SEC today voted unanimously to propose rule amendments to help clarify the meaning of a date in a target date fund’s name and enhance the information provided to investors in these funds as they invest for retirement.  Target date funds are designed to make it easier for Americans to invest for retirement and have been marketed as a “set it and forget it” approach to investing. The name of these funds usually includes a date that represents the year in which the investor intends to retire.

The rule changes proposed by the SEC would enable investors to better assess the anticipated investment glide path and risk profile of a target date fund by, for example, requiring graphic depictions of asset allocations in fund advertisements. The rules also would require an asset allocation “tag line” adjacent to a target date fund’s name in an advertisement.

Last month, as a first step to address potential investor misunderstanding of target date funds, the SEC issued an Investor Bulletin jointly with the Department of Labor explaining target date funds and various aspects that an investor should consider before investing in one.

The SEC is seeking public comment on the rule amendments proposed today for a period of 60 days following their publication in the Federal Register.

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