Thread: 2 IFT maximum - 19 November proposition

So how do we get them to listen to us?

How do we get the sea change necessary to fix this?

That is the question.

Originally Posted by James48843

So how do we get them to listen to us?

How do we get the sea change necessary to fix this?

That is the question.

If we are certain that the way they determine "fair value" is the real problem here (as opposed to frequent trading), I think the thing we need to do is to put together a 1-2 page summary of why this is so. This has to be brief and also straightforward enough so that the average Congressman/Union rep/etc. can read it and understand it in 5-10 minutes. Ideally, it should give one or two examples (using actual dates and how the I fund was priced that day by Barclay's, including +/- FV), and how this caused the TSP to incur additional costs on that trading day. We should also include a proposal for how this problem can be "fixed" (James had a good suggestion about not pricing the I fund until the following morning). Anyone willing to take on a first draft of something like this? James, Griffin, and a few others seem to have the best grasp on this....perhaps you guys could take a first shot at it? Once we get something like this, we can all use it as an enclosure and source of talking points for future contacts with folks that may have some influence on how this proposal fares in the end. I am thinking that the ETAC (Employee Thrift Advisory Council) may be the key group to "educate" about this, since FRTIB intends to meet with them at some point in the near future to discuss the IFT restriction proposal before it is finalized. If the ETAC opposes it, I don't think it is going anywhere fast. If we can get this summary prepared by monday morning, someone could FAX it to both James Sauber (ETAC chairman) and Richard Brown (ETAC vice-chair), and then get them on the phone early this week sometime to discuss it. I think that is what is needed here.........get the facts in the hands of the folks that have some influence over the final decision, and make sure they understand it, and will support us when the time comes.

I wonder if the unions would be able to represent us legally.

http://www.afge.org/Index.cfm?Page=Representation

The AFGE Legal Rights Attorney Program & How to Seek Assistance


The AFGE Legal Rights Attorney Program (“LRA Program”) in the General Counsel’s Office (GCO) provides attorney representation in cases brought by AFGE Councils and Locals on behalf of members. The LRA Program offers free attorney representation to Councils and Locals for meritorious administrative cases (such as arbitrations and Merit Systems Protection Board (MSPB) appeals or other appeals to review boards) where both back pay and attorney’s fees are available.

In order to provide a better understanding of the LRA Program, this information is divided into three parts. First, we explain the referral and evaluation process for Councils and Locals that wish to obtain the services of a Legal Rights Attorney, as well as the responsibilities of a Council or Local which obtains LRA Program assistance. Second, we describe the relevant criteria used by GCO in evaluating referred cases. Third, we briefly outline reasons why the LRA Program is beneficial for Councils and Locals. Questions may be directed to GCO at 202-639-6424.

One of the problems with Union representation (and I'm a mid-level Union rep) is that government wide regulations are normally outside the scope of bargaining. Unions have a voice and role, but the ETAC as a much bigger and better voice, and a legal role here that Unions alone don't have.

Griffin, how about you and I work on that one to two page summary of the problem, how the thrift board's solution actually could make the situation worse, and then how our suggestion of changing the time of the annoucement of the I fund value would eliminate the problem.

If we can work on that together tomorrow, and have a draft ready by tomorrow night, we can use that as our fact sheet, and start sending it out.

I also have been thinking about starting an organization in response. Perhaps it could be called the "TSP Shareholder's Alliance" or something like that. I could then get a website and get all this information up there, and start collecting e-mail addresses of supporters- and then try to go to the December meeting of the Board, and ask to get on their agenda.

Can you help us out, Griffin, with a short two-page or less begining fact sheet?

I am sending an email to stephen losey at the moment, but I think I could get into that tomorrow morning.

Originally Posted by James48843

One of the problems with Union representation (and I'm a mid-level Union rep) is that government wide regulations are normally outside the scope of bargaining. Unions have a voice and role, but the ETAC as a much bigger and better voice, and a legal role here that Unions alone don't have.

Griffin, how about you and I work on that one to two page summary of the problem, how the thrift board's solution actually could make the situation worse, and then how our suggestion of changing the time of the annoucement of the I fund value would eliminate the problem.

If we can work on that together tomorrow, and have a draft ready by tomorrow night, we can use that as our fact sheet, and start sending it out.

I also have been thinking about starting an organization in response. Perhaps it could be called the "TSP Shareholder's Alliance" or something like that. I could then get a website and get all this information up there, and start collecting e-mail addresses of supporters- and then try to go to the December meeting of the Board, and ask to get on their agenda.

Can you help us out, Griffin, with a short two-page or less begining fact sheet?

Good. I sent an email to Losey earlier this evening outlining the same thing- the proposed solution can only make matters worse, and our solutions solves the problem entirely.

I have plans for the morning- church- but will be back on-line in the afternoon tomorrow. We can work on it then.

Have a good night-

Jim

Originally Posted by James48843

So how do we get them to listen to us?

How do we get the sea change necessary to fix this?

That is the question.

Unless you can get the SEC to change the regulation they will not be listening. They are within the guidelines of the regulation. These folks have a legal department and you can bet they checked with them before taking action. Good Luck!


Comments/Guidlines from the SEC Rule:

Mutual funds that invest in overseas securities markets are particularly vulnerable to market timers who may take advantage of time zone differences between the foreign markets on which international funds' portfolio securities trade and the U.S. markets which generally determine the time as of which NAV is calculated ("time-zone arbitrage"). For example, a market timer may purchase shares of a mutual fund that invests in overseas markets based on events occurring after foreign market closing prices are established, but before the fund's NAV calculation, that are likely to result in higher prices in foreign markets the following day. The market timer would redeem the fund's shares the next day when the fund's share price would reflect the increased prices in foreign markets, for a quick profit at the expense of long-term fund shareholders. Market timing opportunities are not limited to international funds. Mutual funds that invest in small-cap securities and other types of investments which are not frequently traded, including high-yield bonds, also can be the targets of market timers.12

Market timing itself is not illegal. However, market timing may dilute the value of long-term shareholders' interests in a mutual fund if the fund calculates NAV using closing prices that are no longer accurate. Dilution may occur, for example, if fund shares are overpriced because redeeming shareholders will receive a windfall at the expense of the shareholders that remain in the fund. Similarly, dilution may occur when a fund sells its shares at a price lower than its NAV.13

Market timing also may harm shareholders because it may cause mutual funds to manage their portfolios in a disadvantageous manner. For example, a mutual fund's investment adviser may maintain a larger percentage of its assets in cash or may be forced to liquidate certain portfolio securities prematurely to meet higher levels of redemptions due to market timing. This is particularly true for mutual funds that invest primarily in foreign or emerging market securities, which are often thinly traded. Mutual funds also may incur increased brokerage and administrative costs related to the frequent purchases and redemptions associated with market timing.

In order to discourage market timers, many mutual funds have developed policies and procedures with respect to frequent purchases and redemptions of fund shares. Some mutual funds disclose in their prospectuses that they do not permit market timing, and many mutual funds have taken steps to discourage market timing. These steps may include, for example:

Imposing redemption or exchange fees on shares that are redeemed or exchanged within a certain time period following their purchase;

Restricting exchange privileges, for example, by restricting exchange requests submitted through a particular medium, such as telephone or facsimile transmission, or received after a certain time of day, or by delaying both the redemption and purchase sides of an exchange;

Restricting frequent trading, for example by limiting the total number of exchanges that an investor may make within a certain time period, or by limiting the number of "round trip" transactions where an investor purchases shares of a fund, exchanges those shares for shares of a different fund, and then exchanges back into the originally purchased fund;

Delaying the payment of the proceeds from the redemption of fund shares for up to seven days;14 and

Identifying market timers and restricting their trading privileges or expelling them from the fund.
While many mutual funds disclose in their prospectuses that they discourage market timing, many do not identify with specificity the frequency or type of trading that they consider to be problematic, or the specific steps that they will take to ensure that market timing trades are detected and prevented. Other mutual funds disclose specifically the number of trades that they consider to be problematic and the steps that they take to prevent and detect market timing. Item 7(c) of Form N-1A requires mutual funds to disclose in their prospectuses procedures for redeeming the fund's shares, including any restrictions on redemptions; any redemption charges, including how these charges will be collected and under what circumstances the charges will be waived; and the circumstances, if any, under which the fund may delay honoring a request for redemption for a certain time after a shareholder's investment.15 Item 8(a)(2) of Form N-1A requires a description of exchange privileges, which may be provided in the prospectus or the Statement of Additional Information ("SAI").16 Item 3 of Form N-1A requires a mutual fund to include any exchange fee or redemption fee in the fee table of its prospectus.17

Other aspects of mutual fund policies and procedures to deter market timing are not explicitly required to be disclosed, however. For example, our registration forms do not explicitly require funds to describe with specificity the circumstances under which restrictions on frequent purchases and redemptions will not be imposed, or the terms of arrangements with particular investors pursuant to which frequent purchases and redemptions are permitted.18

We believe that it may be useful to require mutual funds to describe with specificity the restrictions they place on frequent purchases and redemptions and the circumstances and arrangements under which the restrictions are not imposed. These additional disclosure requirements would enable investors to better assess a mutual fund's risks, policies, and procedures in this area, and to determine if a fund's policies and procedures are in line with their expectations.

http://www.sec.gov/rules/proposed/33-8343.htm#IA

Originally Posted by robo

Unless you can get the SEC to change the regulation they will not be listening. They are within the guidelines of the regulation. These folks have a legal department and you can bet they checked with them before taking action. Good Luck!

Comments/Guidlines from the SEC Rule:

http://www.sec.gov/rules/proposed/33-8343.htm#IA

Legal departments are like most organizations - they tend to focus on what they are good at. The right's of their particpants may not be something that they are pro's at -

You posted good info - but it's dealing with "managed funds" and the abuses that ocurr. TSP is not managed and we are far from being "abusive timers". TSP is a unique entity and one that most people probably would not get into unless they were force to, or were able to time - keep in mind Bush's national TSP program got shot down as the 401K of America because of it's weaknesses.

From the beginning:

Millions of individual American investors hold shares of open-end management investment companies ("mutual funds"), relying on these funds for their retirements, their children's educations, and their other basic financial needs.2 The tremendous growth of mutual funds reflects the trust that investors have placed in funds and the regulatory protections provided by the federal securities laws.

Recent allegations regarding late trading and abusive market timing, however, point to instances where it appears that some in the mutual fund industry, and some intermediaries that sell fund shares, have lost sight of their obligations to investors.3 These allegations relate to abuses in at least three areas:

• "Late trading," the practice of placing orders to buy or redeem mutual fund shares after 4:00 p.m., Eastern time, as of which most funds calculate their net asset value ("NAV"), but receiving the price based on the 4:00 p.m. NAV;
• Abuses related to "market timing," including the alleged overriding of stated market timing policies by fund executives to benefit large investors at the expense of small investors, or to benefit the fund's investment adviser; and
• The selective disclosure by some fund managers of their funds' portfolio holdings in order to curry favor with large investors.

The Commission is extremely concerned by the abuses that have surfaced in the mutual fund industry, and we have taken vigorous enforcement action where abuses have been uncovered.4 We also believe, however, that regulatory reforms are necessary to help prevent such abuses from recurring in the future. The Commission is proposing a package of rule amendments intended to address abuses that have surfaced in the areas of late trading, market timing, and selective disclosure. In this release, we are proposing disclosure reforms intended to shed more light on market timing and selective disclosure of portfolio holdings. In a second release, we are proposing amendments that would require that an order to purchase or redeem redeemable securities of a registered investment companybe received by the company, its designated transfer agent, or a registered securities clearing agency by the time that the fund establishes for calculating its NAV in order to receive that day's price. In addition, we are publishing a release adopting rules requiring registered investment companies and investment advisers to adopt and implement written compliance policies and procedures, review those policies and procedures annually, and designate a chief compliance officer responsible for their administration.

Just want to give a big Thanks to all those who are taking the Bull by the Horns with this issue.

Most definately, great job everyone, count me in for whatever needs to be done.