A participant in the Disney Savings and Investment Plan alleged that the continuance of the Sequoia Fund as a plan investment option was a fiduciary violation. The plaintiff claimed that the fund operated in violation of the Plan’s investment policies, concentrating the fund’s assets in Valeant Pharmaceuticals, Inc. stock. The judge concluded that the plaintiff’s implication that problems at Valeant, not captured within the market price, did not trigger the Plan’s duty of prudence to remove the Sequoia Fund as an investment option. The lawsuit was therefore dismissed.
Of note, acceptance of the plaintiff’s claim of liability would mean that plan fiduciaries would be required to “monitor the market and publicly available information” about every holding within a mutual fund’s portfolio offered within the plan, concentration of stocks within each portfolio, as well as whether or not any “concentration was the result of an imprudent acquisition of additional shares or the dramatic appreciation in value of any particular mutual fund’s original investment.” The court concluded that such duties are not reasonable or appropriate within the context of the case.
www.planadviser.com; November 21, 2016.