Compliance July 25, 2016

Avon to Pay $6 Million to Settle Stock Drop Suit

The lawsuit was filed after disclosure of Foreign Corrupt Practices Act violations in Avon's China operations.
Reported by

The U.S. District Court for the Southern District of New York has preliminarily approved a settlement between Avon Products and participants in its defined contribution (DC) retirement plan.

The settlement calls for Avon to pay $6.250 million to be placed in a settlement fund. A net settlement fund of approximately $4.345 million will be divided among eligible class members, according to Stull, Stull & Brody and Zamansky, LLC, which represented the participants in the DC plan.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

The Employee Retirement Income Security Act (ERISA) lawsuit over Avon’s handling of the company stock fund investment option in its retirement plan, says that in October 2008, Avon disclosed that it was conducting an investigation into the possibility of misconduct in connection with its China operations. In October 2011, the Securities and Exchange Commission (SEC) announced it initiated its own investigation into Avon’s alleged Foreign Corrupt Practices Act (FCPA) violations. According to the lawsuit, Avon’s stock price steadily declined during this period through the announcement of a joint settlement with the SEC and Department of Justice in May 2014—from $32.41 per share to $13.72 per share.

The lawsuit contends that, given their awareness of Avon’s misconduct, the plan fiduciaries should have implemented a freeze on purchases of shares in the Avon stock fund or communicated the truth about Avon’s misrepresentations. To ensure they did not run afoul of securities law prohibiting insider trading, the suit says, plan fiduciaries could have worked to make the company disclose the truth at the same time. 

A fairness hearing for the settlement is set of October 11, according to the docket sheet for the case.

The settlement agreement may be viewed here.

Data & Research July 25, 2016

Providers Expect Fiduciary Rule to Deter Rollovers

Most providers expect the new legislation will help them retain assets.
Reported by

Nearly two-thirds, 64%, of the nation’s top retirement plan recordkeepers and providers believe that the new Department of Labor (DOL) fiduciary rule will deter rollovers from retirement plans into individual retirement accounts (IRAs), thus helping them to retain assets, the LIMRA Secure Retirement Institute found in a survey.

Just more than one-quarter, 28%, think the rule will help them increase asset retention, although 36% think it will have no impact. Another 36% think the rule will have an adverse impact on their asset retention rate. Seventy-five percent say they will change how their call centers respond to retirement plan distribution options.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“The rollover market is expected to exceed $400 billion in 2016,” notes Matthew Drinkwater, assistant vice president at the LIMRA Secure Retirement Institute. “Because asset retention is a top priority for defined contribution (DC) plan providers and recordkeepers, the Institute has been tracking asset retention practices for years. The DOL fiduciary rule impacts all qualified assets and will likely have a major impact on the rollover market, with some DC plan providers benefitting from increased in-plan retention due to a slowdown in IRA rollover activity.”

«