Compliance October 20, 2007

New Bill Would Delay PPA Pension Funding Provisions

A new Congressional legislative proposal would delay implementation of new pension funding rules under the Pension Protection Act (PPA) for a year to better allow regulators to issue the necessary detailed guidance on the new mandates.
Reported by

The proposed bill, H.R. 3868, will delay the implementation of the rules until January 1, 2009, in order to give the Treasury Department enough time to gather public comment and then issue written guidance on how the rules are to be implemented. The measure is sponsored by U.S. Representatives Earl Pomeroy (D-North Dakota) and Eric Cantor (R-Virginia).

“Pension plans are long-term commitments companies make to their employees. Allowing public comment on the rules that will be governing the retirement of millions of American workers is a critical step in the process,” Pomeroy said in a news release announcing the bill. “To assure that these complex and important pension regulations deliver the Pension Protection Act’s long term promise of greater security for the pensions of 20 million Americans, we must make sure that the most important stakeholders – workers and employers – have their say. Pushing back the effective date twelve months will allow adequate time for public comments.’

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Added Cantor: “By providing additional time for our agencies to issue guidance and for the pension community to provide meaningful comment on that guidance, we will further the overarching goal of the PPA–to ensure a solid foundation for workers who count on their pensions as part of planning for a secure retirement.’

According to the announcement, even If guidance were issued immediately on all of the new funding rules “companies would have just about two months to understand and implement those rules for their employees’ pensions. Additionally, these complex rules have components that interact, so employers would have little time to evaluate how the rules would look as a whole.’

The lawmakers said employers don’t have enough time to incorporate the new funding costs into corporate budgets and make the needed changes in computer and recordkeeping systems.

The Markets October 20, 2007

Bear Stearns Probed for Conflicted Trading in Failed Hedge Funds

Massachusetts securities regulators have begun a probe into whether Bear Stearns Cos. improperly traded with two in-house hedge funds that collapsed this summer.
Reported by

The Wall Street Journal reports that regulators in the office of Secretary of State William F. Galvin are examining whether Bear Stearns traded mortgage-backed securities for its own account with the hedge funds without notifying the funds’ independent directors in advance, according to sources familiar with the investigation. Investigators are also attempting to determine whether the trades were priced fairly and whether troubled securities positions were offloaded onto investors in the two funds, the sources told the WSJ.

Investors lost $1.6 billion when the two mortgage-related funds, Bear Stearns High-Grade Structured Credit Strategies Fund and High-Grade Structured Credit Enhanced Leverage Fund, failed.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Federal prosecutors and the SEC are also examining the circumstances surrounding the funds’ collapse, but the Massachusetts investigation appears to be the first suggestion that potential conflicted trading at Bear Stearns is being scrutinized, the news report said. Massachusetts regulators have found “a material number of principal transactions,” between Bear Stearns and the two funds, a person familiar with the investigation told the WSJ.

The Bear Stearns funds’ offering memorandums listed types of arrangements that could lead to conflicts, including handling brokerage business for the funds, allocating positions between the funds and other entities managed by Bear Stearns, valuing the assets of the partnerships, and lending to the funds. Also, when acting for the firm’s own account, Bear Stearns traders have a primary responsibility to make money for Bear Stearns, not for the mostly investor-owned hedge funds.

The memorandums note federal securities law mandates that any investment adviser whose affiliates engage in principal trading with clients must obtain their consent in writing in advance, and Bear Stearns Asset Management, the unit that sponsored the two funds, promised in the memorandums that it would do this by obtaining the consent of the funds’ independent directors, who act on behalf of investors. The two hedge funds each had the same five directors, three of whom were affiliated with Bear Stearns.

They had posted a string of quarters with positive returns, but when the market for subprime home loans went downhill, so did many of the funds’ holdings. Prominent in the funds were pools of securities made up of bonds backed by subprime mortgages, which are extended to borrowers with poor credit.

«

Close