US – The US Department of Labor is now investigating pension consultants following an earlier probe by the Securities and Exchange Commission.
The department’s Employee Benefits Security Administration’s enforcement officials “are currently reviewing the documents provided by the_SEC to determine what DOL investigative action may be necessary,” said DOL assistant secretary Ann Combs in a letter to senators.
“Based on this review, several matters have been referred to EBSA regional offices for investigation.”
She added: “Please be aware that we are also reviewing existing DOL regulations relating to the disclosure of fees, including revenue sharing arrangements, by service providers to employee benefit plans.”
The disclosure follows the Securities and Exchange Commission, which in May last year said it was investigating firms about possible conflicts of interest.
Combs said plan fiduciaries “need to be able to assess whether revenue sharing arrangements might affect the recommendations provided by a service provider such as a pension consultant”.
Combs was replying to an August 12 letter from Democratic representatives Ed Markey and George Miller.
“I am pleased that the Labor Department has decided to investigate several of the pension consultants that the SEC determined have engaged in business dealings that can undermine their ability to offer objective advice to their pension plan clients,” said Markey.
“There is a crisis in the pension marketplace, and sweetheart deals cut by consultants and concealed from pension plans may be contributing to it.
“I urge the Department of Labor to move swiftly to investigate and remove pension consultants who are jeopardizing workers’ retirement security through conflicts of interest, kickbacks, and self-interested fees.”
Last month the UK’s Financial Services Authority’s ‘Financial Risk Outlook 2006’ warned consultants, asset managers and pension fund trustees to guard against potential conflicts of interest in a highly concentrated consultant industry.