401(k) Plans, Mutual Funds and Derivatives - Hello SEC

Posted on June 14, 2010 by Susan Mangiero

Given that mutual funds are a popular 401(k) plan choice, it's not surprising that further regulatory scrutiny of the use of derivatives by traders is underway.

"SEC Staff Evaluating the Use of Derivatives by Funds" (U.S. Securities and Exchange Commission Release 2010-45, March 25, 2010) talks about a new initiative to review the current practices by pools of capital regulated under the auspices of the Investment Company Act of 1940. Scrutiny will focus on items such as:

  • Leverage, concentration and diversification
  • Existing risk management policies and procedures
  • Oversight of use of derivatives by fund board of directors
  • Rules for proper pricing
  • Prospectus disclosures.

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