DOL Inquiry Focuses on Financial Advisers at Breach under ERISA

The Department of Labor has brought an inquiry whether JPMorgan Chase & Co. committed a fiduciary breach under the Employee Retirement Income Security Act of 1974. The inquiry is related to a stable-value fund and could target financial advisors. The liability would stem from whether or not the advisors held too much of a risky asset and improperly diversified the portfolio. The DOL and the spokeswoman for J.P. Morgan declined to comment on the investigation.

If in fact the DOL finds that the investments that were purchased for the fund violated ERISA, both the plan sponsors and advisers who recommended the investments to the 401(k) plan could be on the hook  for failure to perform proper due diligence. Reuters noted that the JPMorgan Stable Asset Income Fund once held as much as 13% of its assets in private-mortgage debt that is rated and underwritten by the firm.  The position has since been reduced to 4%.

ERISA experts stated that the liability on the advisers depends on the amount of information available to the plan fiduciaries. For additional information, please contact Andrew Deddeh at (619) 278-0020 or andrew.deddeh@corecls.com.