- 1 -
June 5, 1990
TO: INVESTMENT ADVISERS COMMITTEE NO. 18-90
RE: INVESTMENT ADVISER GUIDELINES FOR FIDUCIARIES MEETING
__________________________________________________________
As you recall, the United States Court of Appeals for the
Eleventh Circuit recently found a retirement plan's investment
adviser liable for breach of his fiduciary duties under ERISA
because he failed to diversify the plan's assets adequately to
meet cash-flow needs. (See Institute Memorandum to Investment
Adviser Members No. 18-90 dated May 7, 1990.) In another recent
case, the United States Court of Appeals for the Fifth Circuit
found that an investment adviser to a retirement plan may be
liable for fraud as a fiduciary under Rule 10b-5 of the
Securities and Exchange Act. (See Institute Memorandum to
Investment Adviser Members No. 19-90 dated May 21, 1990.)
Finally, the Department of Labor has indicated that it intends to
vigorously enforce ERISA civil penalties against fiduciaries and
non-fiduciaries who are involved with pension plan breaches of
duty under ERISA Section 502(l).
In light of the above, the Institute intends to prepare
operational and contractual guidelines for investment advisers to
use to ensure compliance with their fiduciary responsibilities.
We have scheduled a meeting for Thursday, June 28, 1990, to
discuss these matters and develop parameters for the proposed
guidelines. The meeting will also address the scope of these
guidelines to determine whether they should also include state
pension plan fiduciary requirements, ERISA bonding, prohibited
transactions, etc. It would be useful if you could bring a copy
of your contracts for advisory services to retirement plans and
any guidelines that your firm has established for managing these
accounts.
The June 28 meeting is scheduled for 10:00 a.m. at the
Institute. Please contact Wynetta Culbreath at (202) 955-3525 by
June 25, 1990, if you or another member of your organization will
be able to attend the meeting.
- 2 -
I look forward to meeting you on June 28th and welcome any
related comments you may have in advance of the meeting.
W. Richard Mason
Assistant General Counsel