Monday, June 03, 2013

In Wake of SEC-FINRA Investor Alert, Senate Panel Launches Inquiry into Pension Stream Investments

In the wake of an SEC-FINRA Investor Alert about investments in pension streams, the Senate Labor and Pensions Committee began an inquiry focused on these investments and possible fraud. In a letter to the National Association of Attorneys General, Chairman Tom Harkin (D-Iowa) and Ranking Member Lamar Alexander R-TN) said that there may not be full disclosure around the practice of purchasing pension revenue streams. For example, while some of these arrangements come with very high fees, there is no clarity on whether these fees are fully disclosed.

There may also be requirements linking the purchase of pension revenue streams with the purchase of other financial products. More broadly, the Senators are concerned that innocent investors who purchase the rights to the pensions on a belief that they are worthy and legal investments are being misled or even defrauded by the brokers of these arrangements.

The letter is designed to elicit information on which companies are offering these investments and where the companies are incorporated, as well as details on how these arrangements are structured. The Senators also want information on whether and how many enforcement actions have been brought in this area.