DOL Investigation Requires Investment Adviser to Pay $1.27 Million to Pension Plans

September 21, 2012

The U.S. Department of Labor (“DOL”) recently announced an agreement with USI Advisors, a registered investment advisor, to settle several alleged violations of the Employee Retirement Income Security Act of 1974 (“ERISA”).

An investigation by the DOL revealed that from 2004 to 2010, USI Advisors, while serving as a fiduciary investment adviser allegedly received improper compensation.  Specifically, the DOL alleged that USI Advisors had received 12b-1 fees from investments in mutual funds made on behalf of 13 different ERISA-covered retirement plans, but did not use the 12b-1 fees for the benefit of the plans.  As a result of this settlement USI Advisors agreed to pay a total of $1.27 million, the amount of the indirect compensation received by USI Advisors, to the 13 pension plans.

This settlement should serve as a reminder to all investment advisers who provide investment advice to ERISA covered plans.  If you provide investment advice to an ERISA-covered retirement plan for a fee, then you are considered a fiduciary to the plan under ERISA and need to disclose the exact amount of any indirect compensation received and use that indirect compensation for the benefit of the plan.  An investment adviser can use indirect compensation for the benefit of a plan by either crediting the amount of the indirect compensation to the plan or by offsetting the indirect compensation against other fees that plan would otherwise owe.

Posted by Bryan Hill
Labels: ERISA