Securities Arbitration Lawyers BlogSEC Publishes Investor Bulletin: “Tips for Teachers”
In light of recent investigations and enforcement actions focused on misconduct that targets and victimizes teachers and other public sector employees, the Securities and Exchange Commission (“SEC”) has increased its efforts on protecting these individuals. As part of those efforts, the SEC published an Investor Bulletin titled “Tips for Teachers: Investing for Retirement”.
Additionally, the SEC also refers interested readers to its 36-page “Guide for Teachers”, published by the SEC’s Office of Investor Education and Advocacy in 2018, which walks teachers through financial planning, saving, debt management, investment options, and avoiding fraud.
SEC Lays Out Investment Options For Teachers
In addition to pension plans typically available to teachers, the Investor Bulletin explains the availability of supplemental retirement plans offered by many public education employers, called 403(b) plans or 457(b) plans. Teachers can contribute to these tax-advantaged plans via deduction from their paycheck and employers may also contribute to the account.
The Investor Bulletin encourages teachers to “Ask Questions When Choosing a 403(b) Plan Vendor”. One particular issue the SEC highlights in this section is conflicts of interest, which were a core issue in its recent enforcement action against AIG subsidiary VALIC Financial Advisors, which failed to disclose that it was making payments to a company owned by a Florida teachers’ union in exchange for customer referrals. VALIC was then exclusively promoting its own financial planning products without considering whether other products/services may be in the best interests of the teacher-clients.
SEC Explains The Types Of Investment Products Available Through 403(b) Plans
403(b) plans are only legally permitted to offer annuities and mutual funds.
Annuities can carry high fees, up-front costs, and commissions. These products are complex and sometimes these fees are hidden from unsuspecting investors. The recommendation of annuities without proper disclosures, often motivated by high commissions, can result in investors suffering losses and may constitute investment fraud.
Mutual funds, while usually considered a conservative investment product, can also carry undisclosed costs and fees. For example, the SEC’s recent investigatory sweep into VALIC Financial Advisors also revealed sales practice violations with respect to VALIC’s recommendations of mutual funds. According to the SEC’s findings, VALIC breached its fiduciary duties to clients by failing to disclose a “revenue sharing arrangement” through which VALIC benefitted from recommending certain costlier mutual fund products while better products were readily available for customers.
Key Takeaways
To avoid fraud and build a prudent retirement plan, the SEC urges teachers in this Investor Bulletin, and investors generally, to (1) ask questions, (2) read plan and investment product materials, and (3) consult with a trusted investment professional.
Contact An Experienced Securities Law Attorney Today To Recover Your Investment Losses
Financial advisers often push products that pay high commissions and fees, even when such products are not in the best interests of their clients. Advisers owe their customers a duty to disclose if they stand to financially benefit from an investment recommendation. Investors, especially those who work in the public sector, are entitled to know whether they are truly being sold the best products on the market and should be protected from hidden fees and undisclosed revenue sharing arrangements.
Silver Law Group is experienced in representing investors in claims related to a wide variety of securities and investment fraud matters nationwide. Our lawyers can help you recover losses due to stockbroker misconduct and most cases are handled on a contingency fee basis, meaning you won’t owe us any money unless we recover your money for you. Scott Silver, managing partner of Silver Law Group, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and has extensive experience representing investors in securities and investment fraud cases. Please contact us for a confidential consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.