SEC to focus on retirement products retirees can ‘understand’

The US Securities and Exchange Commission (SEC) is on the hunt for newly emerging risks Mary Schapiro, the regulatory bodys chairman told delegates to the Securities Industry and Financial Markets Associations annual conference held in New York in late-October.In this hunt a focus will be on new products, particularly those related to retirement investing, she stressed.This focus, explained Schapiro, is especially important as employers replace defined benefit plans with defined contribution plans, placing the burden of investment decisions on employees.In my view, barraging investors with retirement products that feature the latest financial gimmick or marketable fad will ultimately be a disservice to investors, their financial intermediaries and the economy overall, said Schapiro.Recent events have reinforced that short-term gains from complex, fee-loaded products can threaten the economy.She continued that investors and future retirees should have access to products they can understand and evaluate, adding this means that complex fee arrangements or product descriptions should be discarded in favour of simple, clear disclosure.The SEC will, she said, pay particular attention to disclosure, product development and marketing for retirement products.The SECs recently created Division of Risk, Strategy and Financial Innovation will have significant responsibility for spotting issues related to new products.The new division, explained Shapiro, will be a knowledge-based centre of expertise and employ people with current street experience in areas such as risk, trading, derivatives and hedge funds.Notably, among market sectors already being probed are life settlements.I have established a task force to review the growth of the life settlements market, focusing on sales practices, disclosure, and the emerging prospect of securitisation of life settlements, said Shapiro.Target date funds are also under investigation, she added