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Release Date:
Release Number: V-201
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921 |
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The U.S. Department of Labor today settled a
lawsuit on Monday, July 20, with Investment Advisers, Inc. (IAI), a
Minneapolis-based investment management company, regarding inappropriate fees
paid to its affiliate, IAI Securities (IAIS), in connection with investment
management services provided to certain employee benefit plans and to
its own in- house pension and profit sharing plans. |
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Within 30 days, the company has been ordered by
the federal court in Minneapolis to pay $376,815 to its in-house plans and
those of its individually-managed accounts which had plan assets invested in
IAI’s Mutual Funds. The amount represents the Securities and Exchange
Commission Rule 12b-1 fees paid by IAI Mutual Funds to IAIS on the
accounts’ behalf plus any earnings which would have accrued to the
accounts if the fees had not been paid. |
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Under the settlement, IAI also has agreed not to
cause any Employee Retirement Income Security Act (ERISA)-covered employee
benefit plan clients of the company to invest in such IAI Mutual Funds that pay
12b-1 or other fees to IAI, its affiliates, subsidiaries or other parties-in-
interest unless the company is allowed to do so by a statutory exemption
granted under ERISA or an administrative or class exemption under 29 U.S.C.
section 1108(a). |
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SEC Rule 12b-1 fees are deducted from fund assets
to pay marketing and advertising expenses or to compensate sales professionals.
The lawsuit alleged that the company violated ERISA when it invested plan
assets in its own family of mutual funds that paid the 12b-1 fees to its own
affiliate. |
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The department’s lawsuit -- a first regarding
inappropriate 12 b-1 fees --focused on the period from at least 1990 through
1996 when IAI’s management of employee benefit plans directed investments
of these plans to their own in-house family of mutual funds, thus providing
additional compensation to the company’s affiliate through the 12b-1 fees
paid. |
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The investigation in this lawsuit was conducted by
the department’s Kansas City Regional Office of the Pension and Welfare
Benefits Administration into violations of federal pension law. |
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The complaint and consent judgment were entered in
the court on July 20. |
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Herman v. Investment Advisers, Inc.
Civil
Action # 98CV1722 |
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U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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