Offering risky investments in 401(k)

[Guest ryler]

We are the TPA of a plan that is a participant directed 401(k), but does not comply with 404©. The spouse of the only plan Trustee has been speaking with the plan's investment manager about adding a new fund option to the plan. We have been contacted by the manager who feels that the new fund is speculative, and would allow participants to try and short the market. He is also concerned about potential lawsuits.

We are trying to think if there is a reason for telling the client that this investment option is too risky to be in a 401(k) Plan. Are there any citations to the prudence requirement that we could use?

Thank you.