April 5, 2012
Judge Orders Fidelity to Pay $1.7M
A federal judge has declared that Fidelity Investments and the American unit of ABB, Inc. violated federal laws by making pension holders pay excessive 401(k) plan fees, and has ordered the defendants to pay $36.9 million in damages.
The decision stems from a class action suit that went to trial for four weeks in January 2010. It was filed by present and former employees of ABB, Inc., an automation and power technology provider, who are participants in two retirement plans offered by ABB: Personal Retirement Investment and Savings Management Plan and Personal Retirement Investment and Savings Management Plan for Represented Employees of ABB, Inc.
The defendants in the case included ABB, Inc., its pension review committee, pension and thrift review management group and its employee benefits committee.
Meanwhile, the judge ruled that Fidelity Trust breached its fiduciary duties by failing to distribute float income solely for the interest of the plan. Fidelity Research violated its fiduciary duties when it transferred float income to the plan's investment options instead of the plan.
Consequently, the judge declared the ABB Defendants liable for $ 13.4 million lost by the plan due to ABB's failure to monitor recordkeeping fees and negotiate for rebates, and $21.8 million lost by the plan due to the mapping of the Vanguard Wellington Fund to the Fidelity Freedom Funds.
The judge also declared the Fidelity defendants were liable for compensating the plan $1.7 million for lost float income.
A Fidelity spokesman told Money Management Executive that the "vast majority" of the claims against Fidelity were dismissed by the court, and that the only finding against the company, "with which we respectfully disagree," was a technical violation. which resulted in a monetary award of less than one half of one percent of the total damages sought by plaintiffs.
Investor Confidence Rises in February
Investors' confidence rose during the first quarter of 2012, according to the newly-released John Hancock Investor Sentiment Index.
According to the survey, investor sentiment improved to +21 in the first quarter of this year, compared with a score of +15 in the fourth quarter of 2011, the most substantial increase since the Index was started in early 2011. The improvement this past quarter was driven by a rise in positive attitudes toward investing in stocks and balanced mutual funds.
In a significant finding, more investors this past quarter believe they are in a better financial position today than they were two years ago: 43% versus 33% in the fourth quarter of 2011.
iShares Shakes Off BATS' Bug
It looks like iShares isn't going to be scared off that easily by the BATS Exchanges's glitch last month.
BlackRock, Inc.'s exchange traded funds business has launched two new funds: iShares Emerging Markets High Yield Bond Fund and iShares Global ex USD High Yield Corporate Bond Fund; with two more scheduled to launch on April 5: iShares Global High Yield Corporate Bond Fund and iShares Morningstar Multi-Asset Income Index Fund.