Critical Supreme Court Ruling for Investment Professionals
On February 20, 2008, the Supreme Court issued a procedural ruling in favor of James LaRue, a defined contribution plan participant, which will allow him to seek recovery of individual investment losses caused by an alleged breach of fiduciary duty. The ruling is significant because, prior thereto, courts interpreted ERISA to provide a remedy only for systemic breaches and resulting losses to a plan as a whole. Participants and their lawyers will now be able to recoup individual losses caused by any negligent act or omission on the part of a plan fiduciary.
Wednesday's ruling is critical for investment professionals, as it opens the door to potential lawsuits for an additional 50 million American employees who have approximately 2.7 trillion dollars invested in 401(k) plans. Numerous studies have shown that the majority of investment firms and their registered and/or advisory representatives do not fully appreciate the extent of their fiduciary duties owed to ERISA plan clients. As a result, many firms have inadequate controls to avoid, detect or remedy fiduciary breaches and prohibited transactions. Moreover, the compliance challenges faced by broker-dealers and RIAs in the wake of the Pension Protection Act and increased regulatory scrutiny relating to disclosure of fees and conflicts create additional exposure and enhanced standards of care.
Fortunately, this enhanced liability can be mitigated through effective risk management initiatives. Our ERISA Plan and Investment Fiduciary Group is working with many of our existing clients to assist them in avoiding prospective exposure through the implementation of fiduciary-based training, supervisory controls and compliance procedures. Additionally, our new ERISA Plan Risk Assessment Program works directly with plan sponsors and their providers to identify and remedy fiduciary breaches and prohibited transactions. For more information on developing a compliant advisory program or plan, please contact Jason C. Roberts, Esq. at (310) 210-1679 or via email at jroberts@edgertonweaver.com.
Wednesday's ruling is critical for investment professionals, as it opens the door to potential lawsuits for an additional 50 million American employees who have approximately 2.7 trillion dollars invested in 401(k) plans. Numerous studies have shown that the majority of investment firms and their registered and/or advisory representatives do not fully appreciate the extent of their fiduciary duties owed to ERISA plan clients. As a result, many firms have inadequate controls to avoid, detect or remedy fiduciary breaches and prohibited transactions. Moreover, the compliance challenges faced by broker-dealers and RIAs in the wake of the Pension Protection Act and increased regulatory scrutiny relating to disclosure of fees and conflicts create additional exposure and enhanced standards of care.
Fortunately, this enhanced liability can be mitigated through effective risk management initiatives. Our ERISA Plan and Investment Fiduciary Group is working with many of our existing clients to assist them in avoiding prospective exposure through the implementation of fiduciary-based training, supervisory controls and compliance procedures. Additionally, our new ERISA Plan Risk Assessment Program works directly with plan sponsors and their providers to identify and remedy fiduciary breaches and prohibited transactions. For more information on developing a compliant advisory program or plan, please contact Jason C. Roberts, Esq. at (310) 210-1679 or via email at jroberts@edgertonweaver.com.
posted by Jason C. Roberts, Esq. at
12:43 PM
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