Industry Groups Unanimous in "Hard Close" Opposition

February 11, 2004 ( - Retirement services industry groups are unanimous in their opposition to the US Securities and Exchange Commission (SEC) proposal for a 4 p.m. Eastern Time trading "hard close" to help fight abusive fund trading practices.

In fact, the National Defined Contribution Council (NDCC), which represents retirement plan service providers, argued that plan participants will lose more than $152 million in current defined contribution assets because of lost investment opportunity of assets in transit. Not only that, but the group asserted that the estimated impact could be just under $1 billion in lost retirement savings over the next 3 1/2 decades. That’s because the retirement inflows (contributions and loan repayments) will take an additional day to be invested in the plans’ investment options so they will lose the opportunity of earning interest during the period the assets are in transit, NDCC said.

As have a number of the trade groups, NDCC asked that intermediaries with proper time and date-stamping safeguards be allowed to accept participant trades up to the deadline.

Other groups’ comments about the “hard close” proposals include:

  • The American Society of Pension Actuaries  (ASPA) said that the proposed hard 4 p.m. close would have a “significant, adverse impact on millions of retirement plan participants. Also, implementing the hard 4 p.m. close will mean dramatic changes in plan administration procedures at a substantial cost.”
  • The American Benefits Council  said imposition of a hard 4 p.m. close will significantly burden employer-sponsored retirement plans and result in delayed trading for plan participants compared to other investors, resulting in an “uneven playing field.”
  • The ERISA Industry Committee  asserted that the proposed amendments discriminate against participants in 401(k) and other retirement plans and are likely to reduce retirement savings by discouraging employees from participating in retirement plans. The commission should allow a retirement plan to submit orders to designated transfer agents after the deadline for orders if the plan’s recordkeeper has adopted adequate precautions to protect against late trading.
  • The Profit Sharing/401(k) Council of America  said the proposed rule will hinder competition, efficiency, and capital formation.   It will influence employers to adopt a specific service provider arrangement and place a large segment of the retirement planning industry at a disadvantage. It could also result in a bias by participants to invest in the proprietary funds of the service provider when also offered funds from other fund complexes.
  • American Council of Life Insurers  said it opposes the concept in the proposal that registrants must disclose with detailed specificity the nature and operation of tools used to manage excessive market timing.  Explicit disclosure of the registrant’s game plan gives an unwitting roadmap to market timers planning manipulation.
  • Investment Company Institute  asked the US Securities and Exchange Commission (SEC) to consider requiring financial intermediaries to receive trade orders by 4 p.m. rather than fund companies themselves (See  ICI Eases “Hard Close” Lobbying Position ).