There could be more trouble coming down the pike for would-be retirees; a new bill is making its way through Congress that would make it easier for brokerage firms to avoid lawsuits for failing to include important information or present facts correctly when issuing reports on exchange-traded funds.

According to a Huffington Post report, although that protection already exists for stocks, the bill—H.R.910/S.327, the Fair Access to Investment Research Act of 2017—would extend that protection to reports on ETFs.

“But the way the bill is written,” the report says, “would shield significant conflicts of interest in the ETF world from a host of lawsuits.”

While index fund ETFs have been growing in popularity since their inception in the 1990s, since 2008 a different and more expensive type of ETF has been expanding: one that’s more complex and carries higher risk, something retirement savers—already notoriously uninformed about the complexities of investment risk—are cautioned to avoid.

MarketWatch reports that although ETFs have soared in popularity since their inception—“accounting for trillions in assets and spearheading the shift to index-based investing,” ETFs haven’t yet made serious inroads into the retirement market.

“In the third quarter of 2016, the most recent period for which there is data,” the report says, “there was $4.76 trillion in 401(k) plan assets, according to the Investment Company Institute (ICI), with $2.99 trillion of that held in mutual funds. That’s roughly 63 percent; to compare, a January report from Cerulli Associates showed that ETFs accounted for a mere 0.02 percent of 401(k) assets.” In addition, the report cites TD Ameritrade data that “ETFs made up 14 percent of its clients’ retirement account holdings.”

But that leaves a lot of room for growth.And according to a report in the National Law Review, they could be poised for just that.

In fact, the House Financial Services Committee and Senate Banking Committee have conducted markups and approved the bill, a previous version of which was originally introduced last year and passed in the House by a vote of 411-6.

The Huffington Post report points out that while outside advisors pick the assets that go into a fund, they are also able to issue research reports on ETFs they advise, “creating a clear conflict of interest.”

In addition, “[a]s it’s currently written, the Fair Access to Investment Research Act would make it harder to sue a company when it issues bogus research reports during the launch of an ETF that it manages.” Whether those reports are bogus or simply mistaken, the safe harbor provision allows greater leeway for problems to arise for the investor.

Retirement savers should proceed with caution.

Instant Insights /

New bill would give safe harbor to ETF research reports

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