Collective Fund Platforms to be Reviewed, Donohue Says

In a recent speech, Buddy Donohue, the Director of the SEC’s Division of Investment Management questioned the operation of collective trust platforms. Mr. Donohue said that the SEC is concerned that banks that operate these platforms merely serve as a custodian and not as a discretionary investment manager subject to appropriate bank regulation. He said that funds on these platforms are often managed by outside advisers responsible for marketing and distribution. He also indicated the SEC would consider “whether there would be a need for any regulatory recommendations.”

OUR TAKE: Collective funds have grown in the retirement marketplace as a low-cost alternative for fund sponsors to enter that market. This is the first time in recent years that the SEC has suggested narrowing the 1940 Act exemption.

http://www.sec.gov/news/speech/2010/spch040810ajd.htm