Pressure on defined contribution plan fiduciaries is expected to rise as recent legal filings by the Department of Labor and Securities and Exchange Commission appear to expand their responsibilities when it comes to managing company stock funds, several ERISA attorneys say.
Some of these comments “will turn fiduciaries, in effect, into in-house securities regulators,” said Stephen Rosenberg, a partner in The Wagner Law Group, Boston.
“Fiduciaries have obligations to participants and beneficiaries,” added Nancy Ross, a partner at Mayer Brown, Chicago. “They are not to be the watchdog for the entire company. It's a quagmire.”
The attorneys were referring to amicus briefs filed March 11 by the SEC and the DOL in the case of Whitley et al. vs. BP PLC et al., now before the 5th U.S. Circuit Court of Appeals, New Orleans. Participants of a BP 401(k) plan accused the company and its plan of breaching fiduciary duties in managing a BP stock fund in the plan. Their briefs supported the BP participants.
The participants alleged company executives failed to provide important information about safety procedures before the April 2010 explosion on the Deepwater Horizon oil rig in the Gulf of Mexico that killed 11 workers.
They claimed company executives provided inaccurate information about oil leakage after the explosion. As a result, they said, participants who held BP American depository shares in the BP stock fund suffered when the stock plunged. And they argued BP fiduciaries could have acted to protect participants by halting further purchases of company stock and/or publicly disclosing information about BP safety practices.
The defendants have maintained, among other things, that they were hamstrung by contradictions between federal securities laws and ERISA.
The DOL said BP plan executives could have taken several actions regarding material non-public information to meet their ERISA obligations without violating securities laws. “In the circumstances here, putting an immediate end to the fraud advances the objectives of both ERISA and securities laws,” said the DOL amicus brief.