The Department of Labor’s 401(k) plan fee disclosure rules that would require U.S. broker-dealers to report how much they are paid to distribute mutual funds through brokerage windows is going to create a nightmare.
Brokers claim that the hundreds of different compensation arrangements that firms will have to disclose are unworkable because of the different fee structures each of the thousands of mutual funds from hundreds of companies have.
The proposed rules are due to take effect on April 1 and require the plan providers to give employers figures for the direct and indirect compensation the broker-dealers receive to service the plans.
Clarification Needed
The Securities Industry and Financial Markets Association has asked for clarification about what they need to disclose and wants guidance on the form the disclosures should take, but a Labor Department spokesman supposedly declined to comment.
So right now, each broker-dealer is taking a different approach in its efforts to comply. Some firms are opting for a “phone book approach” to the disclosure while others are disclosing a “range of compensation” for each fund the firm offers.
Appears there will be more confusion to come.