December 12, 2003

Impact of SEC’s “Late Fund

Yesterday, the SEC issued its proposing release regarding amendments to the mutual fund pricing rules to prevent late trading in fund shares. The proposed rules would require that all purchase and redemption orders be received by the fund (or a single transfer agent designated by the fund or registered clearing agency) no later than the time at which the fund prices its securities, typically 4 pm.

This change would have an impact on the operation of 401(k) plans. The proposal states that administrators of defined contribution employee pension plans – such as 401(K) plans – have informed the SEC that they likely will be unable to process any purchase or redemption requests the same day they are made.

Another issue that operating companies have to consider is market timing through trading in 401(k) investment options by plan participants. For example, it has recently been reported that some employees have been engaging in market timing in the Federal Reserve’s employee thirft plan, and that the Fed has issued two letters to participants and imposed a restriction on rapid trading. Possible measures to restrict market timing in plans (e.g., redemption fees or trading restrictions) have to be reviewed for possible ERISA issues. Thanks to our roving reporter, Mike Holliday, for the information above!

Scrushy Looking to Overturn SOX

According to a brief story on, Richard Scrushy’s lawyers said yesterday that part of Scrushy’s defense in his criminal fraud case is “overturning SOX” (there is no further elaboration in the story). Scrushy, former CEO of Healthsouth, is alleged to have signed false 906 certifications. What kind of name is “Scrushy” anyways…