Three separate whistleblowers have filed disclosures with the U.S. Securities and Exchange Commission (SEC), alleging that financial intermediaries of 401ks and pensions are short-changing their retirement plan clients by pocketing billions of dollars that rightfully belong to retirement plans. According to Forbes, the whistleblower complaints focus on how financial intermediaries systemically conceal and pocket billions in mutual fund “omnibus” payments.
The three whistleblower complaints were filed between May 2018 and October 2020. They claim that financial intermediaries serving as custodians, recordkeepers and trustees to 401ks and pensions are pocketing billions of dollars through secretive omnibus payments.
Mutual funds openly acknowledge that they make omnibus payments to financial intermediaries. However, according to Forbes, these payments have long been shrouded in secrecy as mutual funds and intermediaries “refuse to permit retirement plan sponsors to view the agreements to determine either how the payments are calculated or the actual dollar amounts related to their specific 401ks and pensions.”
The SEC whistleblowers allege that billions of dollars that rightfully belong to retirement plans are being paid instead to financial intermediaries through these secretive omnibus payments. The omnibus payments may undermine the integrity of the nation’s 401ks and pensions by detrimentally impacting the investments, costs, and net performance of retirement plans and investment accounts. The whistleblowers allege that this is an industry-wide practice and urge the SEC to take immediate action.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recouped by the government. Whistleblower award payments are made out of a fund entirely financed through monetary sanctions paid to the SEC by securities law violators.