The Securities and Exchange Commission has requested detailed information from mutual-fund firms about how and why they pay to be included in 401(k) plans.
Boston-based Putnam Investments confirmed that it recently received a questionnaire from the SEC about the practices of its defined-contribution plans.
The firm is cooperating with the agency, said Laura McNamara, spokeswoman for Putnam Investments, a unit of Marsh & McLennan Cos.
SEC spokesman John Heine said Tuesday the agency doesn't comment on the specifics of any information request. But the SEC has previously confirmed that it's looking at why certain investments are recommended for 401(k) plans and pensions.
According to the McHenry Group, a prominent industry consulting group in Emeryville, Calif., the SEC sent a list of 25 questions to mutual-fund firms over the past few weeks about so-called revenue-sharing arrangements in company-sponsored retirement plans.
Mutual-fund firms pay to be included in the fund lineup offered by companies such as Vanguard and Fidelity that provide 401(k) administration to employers.
The SEC letter asks how these arrangements are disclosed and whether certain funds receive "different positioning" as a result, according to McHenry Group.
The revenue-sharing arrangements are not illegal. Yet critics say that they can artificially inflate fees paid by retirement-plan investors _ many of whom are not aware of these pacts _ and may result in more expensive funds being offered.
Mutual-fund companies may turn over as much as 75 percent of the fees collected from retirement-plan investors to recordkeepers, in exchange for administrative services and placement, according to Brent Glading, founder of Glading Group, a pension-consulting firm in Montclair, N.J.
"Up until this point, the SEC has not been asking these questions," said Ward Harris, managing director of McHenry Group. "They're looking at it now because the industry has taken so many hits in the past year."
Mutual-fund firms have been embroiled in regulatory probes related to improper practices that potentially harm long-term investors. In the wake of these inquiries, regulators have expanded their focus and begun looking at mutual-fund expenses.
