PLANSPONSOR - September - October 2023 - 8

RULES & REGULATIONS
The Investment Company Institute
responded, " The SEC has missed the
mark by forcing money market funds to
adopt an expensive and complex mandatory
fee on investors. There is no precedent
for such a fee framework. " But it
applauded increasing daily and weekly
liquid asset requirements and " the
Commission's recognition that swing
pricing is not an appropriate regulatory
tool. " The rule updates are predicted to
take effect next August.
Verizon Reaches Settlement
In 401(k) Suit
Verizon Communications Inc. has
agreed to settle a complaint from 2016
related to allegations of an underperforming
hedge fund in its retirement
plan target-date funds.
Class representative Melina Jacobs
and Verizon accepted the proposed
settlement of the lawsuit, pending court
approval, over allegations that Verizon
and its employee benefits committee
failed to uphold their fiduciary duty in
monitoring the performance of hedge
fund Global Opportunity Fund and not
taking " corrective action regarding the
Fund despite obvious
and long-term
underperformance. "
Verizon's attorneys had argued that
the company had been following its fiduciary
duty in monitoring the TDFs, which
are managed by Russell Investments
and J.P. Morgan. Other allegations were
dismissed in multiple rulings. Fidelity
Investments was removed as a defendant
as it had not been a plan fiduciary.
One-third of the settlement will go
to the law firms representing the class,
with the remainder going to plan participants
as tax-deferred contributions to
their accounts or rollovers into individual
retirement plan accounts.
Verizon did not immediately respond
to a request for comment on the proposed
settlement. The Global Opportunity
Fund, as described by plaintiffs in the
settlement document, used a
strategy
8 PLANSPONSOR.COM September - October 2023
aiming to " add value, relative to its benchmark,
by investing in the most attractive
markets on a global basis, while simultaneously
underweighting, or shorting,
markets that are viewed by the fund
managers as overvalued. "
DOL Secures Settlement for
DST Systems Participants
Fiduciaries of a retirement plan sponsored
by DST Systems Inc., including
its
adviser
investment management
firm Ruane, Cunniff & Goldfarb Inc.,
on July 14 settled a lawsuit to resolve
violations of the Employee Retirement
Income Security Act, according to the
Department of Labor.
In October 2019, the DOL filed one of
several lawsuits alleging the mismanagement
of investments in the DST Systems
Inc. 401(k) Profit Sharing Plan. The DOL
suit alleged that the company's fiduciaries
violated ERISA by " failing to diversify the
plan's assets to minimize the risk of large
losses and failing to act prudently and
loyally in managing these assets when the
investment manager invested the plan's
assets on a highly concentrated basis in a
select number of securities. "
DST
Systems,
an
informationprocessing
software and service provider,
was acquired by SS&C Technologies
Holdings Inc. in January 2018.
The suit challenged DST Systems'
investment in Valeant Pharmaceuticals
International Inc. stock, which had grown
to more than 45% of the plan's assets prior
to, in 2015, the stock's collapse following a
fraud scandal.
Participants
resultingly
failed to properly
monitor the investment
manager's activities. Since the complaint
was filed, the adviser firm has taken steps
to better diversify investments in other
ERISA-covered plans it manages, the
DOL said.
SS&C Technologies Holdings Inc.
did not immediately respond to a request
for comment.
The SEC's New Rules Aim at
Companywide Cybersecurity
Cybersecurity rules adopted by the
Securities and Exchange Commission in
July will require investment in additional
training and resources, say compliance
experts who have studied the rules.
Under the new rules, public companies
need to disclose " significant " cybersecurity
events within four business days
of their discovery and maintain policies
and procedures to ensure compliance.
The first required step for businesses
will be to determine whether a digital risk
is significant, says Richard Cooper, global
head of financial services at Fusion Risk
Management. To do that, he says, firms
must first understand, based on their
type of business, what security breaches
would be a concern.
A significant
event, Cooper
says,
would be if a bank's access to cash, loans
or key information on its clients and the
market was breached or compromised,
whereas leaks of internal training material,
preliminary data or publicly available
information likely would not be.
He says, for all relevant companies,
experienced
significant losses to their retirement
savings, the DOL said. An investigation
by its Employee Benefits Security
Administration found that Ruane,
Cunniff & Goldfarb controlled 100% of
the investments of the profit-sharing
portion of the plan. EBSA also found that
DST Systems and individual defendants
and all departments, employee training
will be essential-so they can recognize
an event and know how report it and
to whom. An exception to the four-day
maximum would be if reporting would
compromise national security or public
safety. Then the firm may request up to
120 days of extensions from the attorney
general's office. -PS
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PLANSPONSOR - September - October 2023

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