The New York Stock Exchange's enforcement arm is warning them that some of their employees could be jeopardizing their clients' retirement security.
November 21, 2006 (Press Release) --
As brokerages vie for the right to manage billions in rollover individual retirement accounts, the New York Stock Exchange's enforcement arm is warning them that some of their employees could be jeopardizing their clients' retirement security.
The NYSE's enforcement unit has seen an increase in complaints from investors who've suffered big losses after money they rolled from their former employer's 401(k) plan to an IRA was invested in high-risk stocks and mutual funds.
In a memo posted Thursday on its website, the enforcement arm, called NYSE Regulation, reminds member firms that they're required to recommend investments appropriate for their customers. Frequently, "We're talking about investors who don't have a lot of experience," says Allison Bishop of NYSE Regulation.
In June, a former UBS Financial Services broker was barred for four years for investing a group of refinery workers' retirement savings in technology stocks at the height of the tech bubble. Once the market crashed, some of the investors lost more than $500,000 in savings, the NYSE said.
NYSE Regulation can fine and censure member firms, bar individuals from working in the securities industry and refer cases to the Securities and Exchange Commission's enforcement division.
Brokerages are aggressively marketing their services in hopes of capturing money from IRA rollovers, which this year alone will exceed an estimated $221 billion. That market is likely to grow as more companies automatically enroll new employees in 401(k) accounts, something made easier by the pension reform law enacted this year. Young job changers who want to consolidate their former employers' plans in one account are prime candidates for rollover IRAs.
Investors who roll their company retirement plan savings into an IRA have more investment options than are offered by most 401(k) plans. Besides mutual funds, IRA owners can invest in individual stocks and non-traditional investments, such as real estate.
But the NYSE memo notes that many workers with 401(k) plans have little investment experience. And their 401(k) savings sometimes make up a major portion of their retirement savings. If they're retired, they may lack the time to recoup large losses.
The NYSE memo stresses that brokerage firms are responsible for training brokers who handle IRA rollovers. Firms are also expected to monitor the accounts once the money is invested in an IRA. Early detection of potential problems in an account, such as frequent trades, could limit losses, the NYSE says.
It often takes NYSE Regulation years to develop and prosecute enforcement actions. For that reason, it could be months or years before any recently launched investigations into IRA rollovers become public.
Author: Sandra Block
Source: http://www.usatoday.com/
The NYSE's enforcement unit has seen an increase in complaints from investors who've suffered big losses after money they rolled from their former employer's 401(k) plan to an IRA was invested in high-risk stocks and mutual funds.
In a memo posted Thursday on its website, the enforcement arm, called NYSE Regulation, reminds member firms that they're required to recommend investments appropriate for their customers. Frequently, "We're talking about investors who don't have a lot of experience," says Allison Bishop of NYSE Regulation.
In June, a former UBS Financial Services broker was barred for four years for investing a group of refinery workers' retirement savings in technology stocks at the height of the tech bubble. Once the market crashed, some of the investors lost more than $500,000 in savings, the NYSE said.
NYSE Regulation can fine and censure member firms, bar individuals from working in the securities industry and refer cases to the Securities and Exchange Commission's enforcement division.
Brokerages are aggressively marketing their services in hopes of capturing money from IRA rollovers, which this year alone will exceed an estimated $221 billion. That market is likely to grow as more companies automatically enroll new employees in 401(k) accounts, something made easier by the pension reform law enacted this year. Young job changers who want to consolidate their former employers' plans in one account are prime candidates for rollover IRAs.
Investors who roll their company retirement plan savings into an IRA have more investment options than are offered by most 401(k) plans. Besides mutual funds, IRA owners can invest in individual stocks and non-traditional investments, such as real estate.
But the NYSE memo notes that many workers with 401(k) plans have little investment experience. And their 401(k) savings sometimes make up a major portion of their retirement savings. If they're retired, they may lack the time to recoup large losses.
The NYSE memo stresses that brokerage firms are responsible for training brokers who handle IRA rollovers. Firms are also expected to monitor the accounts once the money is invested in an IRA. Early detection of potential problems in an account, such as frequent trades, could limit losses, the NYSE says.
It often takes NYSE Regulation years to develop and prosecute enforcement actions. For that reason, it could be months or years before any recently launched investigations into IRA rollovers become public.
Author: Sandra Block
Source: http://www.usatoday.com/
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