Compliance October 4, 2010

Auditors Suggest EBSA Could Do More about Conflicts of Interest

An audit report claims the Department of Labor’s Employee Benefits Security Administration (EBSA) could do more to protect retirement plan assets from conflicts of interest.
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The DoL’s Office of Inspector General (OIG) said the narrow definition of a fiduciary and the lack of regulations dealing with conflicts of interest have hampered EBSA’s enforcement program.  The OIG recommended that EBSA broaden the definition of a fiduciary for investment advisers, and develop regulations requiring disclosure of all conflicts of interest and consideration of conflicts of interest in selection of service providers.  

According to the OIG, the Assistant Secretary for EBSA agreed with its findings and recommendations.  

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The audit found that EBSA has taken several actions to evaluate and reduce risk of harm to plan participants and beneficiaries from conflicts of interest in service providers, including: 

  • developing two new regulations regarding fee determinations and disclosures and is requiring this information be reported to EBSA;  
  • following up on the 2005 SEC report on conflicts of interest and initiating 12 specific investigations;  
  • working with the SEC to develop guidelines for plan fiduciaries to use in selecting and monitoring specific service providers; and  
  • implementing the Consultant Adviser Project, which concentrated resources on improper, undisclosed compensation by certain service providers.  

  The OIG said that while these actions go a long way toward creating transparency in plan activities and improving protections for plan assets and participant benefits, EBSA needs to do more to protect plan participants and beneficiaries from conflicts of interest in service providers. Specifically, EBSA needs to address other critical regulatory areas, such as broadening the definition of fiduciary status for investment advisers, requiring disclosure of all conflicts of interest and consideration of these conflicts of interest by plan fiduciaries when selecting service providers.   

The report said the narrow definition of a fiduciary and the lack of regulations dealing with conflicts of interest has hampered EBSA’s enforcement program. For example, while the SEC reviewed 24 pension service providers and took action on 13 instances of inadequate disclosure of conflicts of interest, EBSA, using its regulations, could not take any enforcement action on the inadequate disclosure to pension plans. 

Deals & People October 4, 2010

State Street Appoints Deputy Head of e-Exchange Biz

State Street Corporation announced that Samuel Cole will join the company next month as executive vice president and deputy head of State Street’s e-Exchange business.
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State Street’s e-Exchange business is a division of State Street Global Markets which provides advanced trading solutions for a variety of markets including foreign exchange, swaps, U.S. treasuries, and exchange-traded derivatives, among others. Cole will be responsible for product, technology, and operational activities across the e-Exchange portfolio. He will also be responsible for the coordination of all State Street Global Markets activities locally.   Cole will be based in New York.

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Cole will report to Clifford Lewis, executive vice president and head of State Street’s e-Exchange business and will join the State Street Global Markets Executive Management Group.  

According to the announcement, Cole joins State Street from BlueMountain Solutions, Inc., a risk and analytics service provider, where he served as president. He also served as the chief operating officer, co-head of trading, and a managing principal at the parent company, BlueMountain, an alternative asset manager focused on the broader credit and derivatives markets. Prior to joining BlueMountain, Cole was a senior consultant for McKinsey & Co. and has also worked as a private equity and defense analyst.   

Cole earned an MBA from MIT’s Sloan School of Management, a Master of Arts from the Fletcher School of Law and Diplomacy at Tufts University, and a Bachelor of Arts with Honors in Government from Harvard University.

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