U.S. District Judge David A. Katz of the U.S. District Court for the Northern District of Ohio ruled that UMB Bank had met the legal requirements for Section 404(c) under the Employee Retirement Income Security Act (ERISA).
Specifically, Katz found that:
- plan documents clearly indicated the plan’s intent to invoke Section 404(c);
- the participants had independent control over their accounts and were provided sufficient information to establish the opportunity to exercise that control; and
- participants could invest in any asset that was legally permitted and administratively feasible.
Plaintiffs filed the suit after finding out that their accounts had been hit with a significant asset loss because of the activities of the adviser whom both had appointed to manage their accounts.Among other things, the participants claimed that the trustee breached its fiduciary duty by withholding material nonpublic information that it must have obtained in the trustee’s own lawsuit against the adviser and by continuing to process allegedly forged investment directives without consulting or warning them.
In response to the trustee invoking the 404(c)
defense, participants claimed the defense should have
been denied to the trustee for withholding information
about the adviser’s activities. Katz rejected that
argument, saying if UMB had actively concealed the
information, it could not have used the 404(c)
The ruling is available here .
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