Compliance June 8, 2011

DoL Gets $10.5M for DirecTECH ESOP Plan Participants

The U.S. Department of Labor (DoL) obtained six consent judgments requiring payment of nearly $10.5 million in restitution to the DirecTECH Holding Co. Inc. Employee Stock Ownership Plan (ESOP).
Reported by

The Department also obtained $1,045,454 in civil penalties to the federal government, in addition to the $10,454,545.

The DoL sued the trustees and other fiduciaries of the employee stock ownership plans and eligible individual account plans of DirecTECH Holding Co. Inc. and its former subsidiaries for allegedly using plan assets to purchase company stock at inflated prices in violation of the Employee Retirement Income Security Act (ERISA).  

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The suit said the board of directors and trustees to the plans violated ERISA by causing or allowing the plans to pay inflated prices to purchase company stock over the period of December 31, 2003, through September 8, 2006. During the period, the plans purchased company stock at a total price in excess of $60 million, which had a reported value of approximately $18 million as of December 31, 2007 (see “DoL Sues Trustees over Company Stock Purchases“).  

The DoL also claimed the plans’ fiduciaries used flawed valuations for the stock transactions, failed to select a qualified appraiser for the stock transactions, and provided inaccurate and incomplete information to the appraiser and his firm.   

The plan covered 5,799 participants employed by businesses in Kentucky, Michigan and Louisiana.
The Markets June 8, 2011

FaithShares Shutters Four Faith-Based ETFs

IndexUniverse.com reports that Oklahoma-based FaithShares has shuttered four of its five exchange-traded funds (ETFs) after the funds failed to attract significant assets.
Reported by

The four ETFs scheduled to stop trading on July 15 are: 

  • FaithShares Baptist Values Fund 
  • FaithShares Catholic Values Fund 
  • FaithShares Lutheran Values Fund 
  • FaithShares Methodist Values Fund 

These funds were linked to particular segments of Christianity, but the remaining fund, the FaithShares Christian Values Fund, is focused on Christian values in general, according to a weekly report from Morgan Stanley Smith Barney on the U.S. ETF landscape. Few investors are interested in overly-specific investment themes to sustain narrowly focused lines of products, IndexUniverse.com noted.  

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FaithShares had a total of $10.6 million in assets as of June 3. At that time, its remaining fund (FOC) had almost $3.1 million; the Baptist fund (FZB) had almost $1.5 million; the Catholic ETF (FCV) had $3.1 million; the Lutheran fund (FKL) had almost $1.5 million; and the Methodist ETF (FMV) had just over $1.5 million. 

The filing with the Securities and Exchange Commission showed that the last day of trading for the closing ETFs will be July 15; the funds are expected to liquidate their assets between July 20 and July 27. The regulatory paperwork claimed that shareholders remaining in any of the closing funds as of July 27 will have their shares redeemed automatically on that date and receive, in cash, the net asset value of their shares as of the close of business on July 27. This amount includes any accrued capital gains and dividends.  

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