Advice to Fund - option in plan?

[Erik Read]

Have a client that provides research and analysis to a Public Mutual Fund. Client get's paid on a contract basis.

Can anyone see a reason why the client shouldn't or wouldn't be able to offer the fund as an investment option in the 401(k)?

Only issue I can think of goes toward insider trading, however the client does not have any influence over the way the research is used, or what is derived on the Fund Family side - so I think that would be a mute point.

Any other thoughts?

Thanks

[Erik Read]

Okay - I'm thinking since so many have viewed, and I don't have anyone hazarding a guess or sugestions, that I've stumped us - pretty impressive.

At any rate, here is my logic for why I think it would be allowed:

Client provides research only

Mutual Fund managers are not influenced by the client - they interprit the research.

Fund is publically traded on a national exchange

Information gatherd is available to the public, but not readily (now we're getting iffy)

Anyone agree / disagree - help me out here...

Thanks all.

[Jon Chambers]

In general, I think you are ok with these facts. But let me give you a couple more things to worry about. Participant argues that selection of the fund in question is not made in the best interests of participants and beneficiaries, but is a quid pro quo for the contract. If the fund underperforms, participant alleges a breach of fiduciary conduct on fund selection.

Best way to address this would be through the plan's IPS. If fund is selected and monitored in accordance with objective criteria, it's unlikely that the selection would be questioned. Additionally, if an unaffiliated and unconflicted advisor supports the fund selection decision, that would help significantly (see the terms of the settlement agreement in the First Union case).

[Erik Read]

Perfect - thanks Jon that's the feedback I wanted.

The fund is in line with all provisions in the IPS, and has been reviewed by an unbaised party for suitability.

I just wanted to get someone to agree. We settled on the option being okay, as long as every participant was also aware of the relationship between the sponsor and the investment option.

Thanks again!