March 30,2004

Grassley, Baucus Urge Fair Treatment for Retirement Plan Participants

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, have urged the Securities and Exchange Commission to consider the impact of a proposed mutual fund reform on retirement plan participants.

In a letter to the Securities and Exchange Commission this week, Grassley and Baucuspraised the commission’s well-intended efforts to clean up mutual fund abuses. They said one ofthe commission’s proposed rules might inadvertently harm retirement plan participants. The commission’s proposed rule barring mutual fund trades after 4 p.m. would give investors who trade directly with mutual funds or the funds’ primary transfer agents a distinct advantage over retirement plan participants, whose trades take longer to process. The impact would be even harder on retirement plan investors in Western states dealing with East Coast stock markets.

“For a lot of Americans, their retirement plan is the only investment they’ll ever have,”Grassley said. “They don’t have a lot of loose change. Every dollar they can spare goes into theirretirement account. It’s only fair for them to be on equal footing with every other investor.”Baucus said, “As the baby boom generation heads toward retirement, it is becoming evenmore essential that retirement investments are protected and receiving the same advantages as othermutual fund investors. To protect today and tomorrow’s retirees, as well as the next generation, Iurge the SEC to rethink their proposal so it works for all investors.”

The text of the Grassley-Baucus letter to the Securities and Exchange Commission follows.

March 29, 2004

The Honorable William H. Donaldson
Chairman, Securities and Exchange Commission
450 Fifth Street, NW, Room 6000
Washington, DC 20549

Dear Chairman Donaldson:

We are writing to commend the Commission for its efforts to address abuses that haveoccurred at a number of mutual fund companies – including the practice of “late trading” in mutualfunds, which violates current law and unfairly advantages some mutual fund investors over others.We believe that a strong response from the Commission to the shameful events that have occurredat some fund companies is a critical step to restoring investors’ confidence in the integrity of ourfinancial system. We encourage you to continue your efforts to expose and punish those who haveabused their positions of trust and authority to do wrong.

While we commend the Commission’s actions with respect to the mutual fund abuses, weare concerned that retirement plan participants could be inadvertently harmed by one aspect of theCommission’s proposed rules issued in response to late trading. Under the proposed “hard 4 p.m.deadline” rule, investors who trade directly with mutual funds or the funds’ primary transfer agentswill have a distinct advantage over retirement plan participants, whose trades are typically processedby plan administrators or other third-party intermediaries. At a minimum, retirement plan investorswill face earlier trading deadlines in order that plan administrators may perform the variousadministrative and required compliance functions prior to submission of the orders to the fund by4 p.m. These deadlines will be set even earlier in the day for retirement plan investors in moreWestern regions of the United States given the time zone differential with the east coast-based stockmarkets. The effect will be the end of same-day execution of trades for many retirement planinvestors, and more complex trading orders may stretch over several days.

American investors have already been harmed by improper trading practices at mutual fundcompanies. Most Americans hold a large portion of their financial investments through theirretirement plans, and we believe it is important to ensure that ordinary Americans are not harmedagain through the issuance of rules designed to protect them.

Thank you for your consideration of these important issues for retirement plan investors. Welook forward to working with the Commission on these and other mutual fund reform issues in themonths ahead.


Charles E. Grassley 

Max Baucus
Ranking Member

cc: Commissioner Paul S. Atkins
Commissioner Roel C. Campos
Commissioner Cynthia A. Glassman
Commissioner Harvey J. Goldschmid
Ann Combs, Assistant Secretary of Labor, Employee Benefits Security Administration