Watchdog casts doubt on federal oversight of conflicts of interest

The watchdog agency conducted the study at the request of lawmakers who asked the GAO to evaluate "where issues around conflicts of interest and investment advice stand today," the report said. "GAO's analysis of Morningstar mutual fund data from 2018 to 2021 found that funds tha...

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Bibliographic Details
Published inFinancial Planning (Online)
Main Author Salinger, Tobias
Format Trade Publication Article
LanguageEnglish
Published New York SourceMedia 28.08.2024
Subjects
Conflicts of interest
Equity funds
Fiduciaries
Individual retirement accounts
IRA
Regulatory agencies
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Summary:The watchdog agency conducted the study at the request of lawmakers who asked the GAO to evaluate "where issues around conflicts of interest and investment advice stand today," the report said. "GAO's analysis of Morningstar mutual fund data from 2018 to 2021 found that funds that compensate financial professionals based on whether their clients invest in those funds (a proxy for conflicts) is associated with lower average returns before fees," Nguyen continued. "DOL does not have authority to audit IRAs for prohibited transactions and, therefore, is generally unable to refer IRA fiduciaries to IRS for excise tax enforcement," Nguyen wrote. [...]IRS implements an audit process for IRA fiduciaries, IRA investors may continue to be exposed to adverse impacts of prohibited transactions that can jeopardize their financial security in retirement."