Deals & People September 5, 2012

NAPFA Elects Locker as National Chair

Lauren Locker was elected national chairman of the National Association of Personal Financial Advisors (NAPFA) on August 31 to fill the recently vacated position.


 

 

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Locker brings years of regional and national board leadership to NAPFA’s top volunteer position, and will assume the chairmanship immediately. She succeeds Susan John, who stayed on when Ron Rhoades, who had been chair-elect, stepped down voluntarily last month because of a compliance error. (See “Compliance Registration Error Causes NAPFA Chair-Elect to Resign.”)

Locker founded Locker Financial Services LLC in Little Falls, New Jersey, in 1992. She became a Certified Financial Planner in 1994 and joined NAPFA in 1998. Her practice was established to work with middle-income individuals, especially women and non-traditional families. During her more than 20 years in the field, she’s seen a growing demand for financial services that focus on the aging and elderly population. To better understand and serve these clients, she became a Registered Financial Gerontologist (RFG) as well as a Certified Senior Advisor. She established a new division of her business, ElderLife, to work with aging adults.

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Locker is the immediate past-chair of NAPFA’s Northeast/Mid-Atlantic Board and has served on NAPFA’s National Board for the past two years. In her new role, she is committed to seeing NAPFA achieve its goal of becoming “the recognized and unquestioned leader in supporting the professional growth and business development of extraordinary financial advisers.”

Locker’s objectives will be to lead the board in its effort to sharply define and promote the NAPFA brand; provide NAPFA members with educational opportunities; and ensure that the organization’s fiduciary perspective is represented nationally.

Calling this a critical time for the organization and the industry, Locker said that the current debate regarding oversight and regulation gives NAPFA members an opportunity to bring their commitment to the fiduciary standard to the forefront. “Our members already pledge to employ full disclosure, transparency and accountability in every interaction with every client,” Locker said. “We can’t let uncertainty about regulatory issues cause us to lose that all-important focus. We need to forget about ‘business as usual’ and begin to think in terms of business as it should be to meet the needs of the public who have their eyes open and their expectations set high.”

 

Compliance September 5, 2012

Court Revives Fifth Third Stock Drop Suit

The 6th U.S. Circuit Court of Appeals has revived a lawsuit against Fifth Third Bank concerning company stock holdings in its employee retirement plan.
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The 6th Circuit reversed a lower court’s decision to dismiss the case because employee stock ownership plan (ESOP) sponsors are given a presumption of prudence in keeping plan assets invested in company stock due to the nature of the plan (see “Judge Tosses Fifth Third Stock Drop Suit”). The appellate court noted that the “legislative history combined with a natural and clear reading of § 404 [of the Employee Retirement Income Security Act (ERISA)] [led] to the inexorable conclusion that ESOP fiduciaries are subject to the same fiduciary standards as any other fiduciary except to the extent that the standards require diversification of investments.”   

They do not relieve a fiduciary from the general responsibility provisions of § 1104—which require a fiduciary to discharge his duties respecting the plan solely in the interests of plan participants and beneficiaries and in a prudent fashion—nor does it affect the requirement that a plan must be operated for the exclusive benefit of employees and their beneficiaries.  

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The 6th Circuit also recalled its previous decision in Pfeil v. State Street Bank and Trust Company, holding that the presumption “is not an additional pleading requirement and thus does not apply at the motion to dismiss stage.” In that ruling, the appellate court explained that an ESOP plaintiff could rebut this presumption of reasonableness by showing that a prudent fiduciary acting under similar circumstances would have made a different investment decision, which is best-served through a fully developed evidentiary record (see “Appellate Court Reopens Case Against State Street by GM Participants”).   

As Pfeil explained, plaintiffs need only allege a fiduciary breach and a causal connection to losses suffered by the plan, which the court determined the plaintiffs in the Fifth Third suit have done. John Dudenhoefer and Alireza Partovipanah, former employees of Fifth Third Bank, allege that Fifth Third engaged in lending practices that were equivalent to participation in the subprime lending market that they were aware of the risks of such investments by the start of the class period, and that such risks made Fifth Third Stock an imprudent investment. The plaintiffs allege the price of Fifth Third Stock dropped 74% during the class period.   

The Amended Complaint also expressly alleges that “[a]n adequate (or even cursory) investigation would have revealed to a reasonable fiduciary that investment by the Plan in Fifth Third Stock was clearly imprudent. A prudent fiduciary acting under similar circumstances would have acted to protect participants against unnecessary losses, and would have made different investment decisions.”  

The opinion in Dodenhoefer v. Fifth Third Bank is here.

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