Breach Suit against Broker Too Late

A judge has dismissed a profit-sharing plan participant’s fiduciary breach suit against the plan’s broker because it was filed after the three-year statute of limitations required under the Employee Retirement Income Security Act (ERISA).

U.S. District Judge Terry R. Means of the U.S. District Court for the Northern District of Texas made the ruling in a suit filed against a Dallas-based sales company now called Schnair Sales and Service, its former president and plan trustee, and an RBC Dain Rauscher broker. Means asserted that because the suit by Terrence M. Hanlon, who purchased the company in 2001, was not filed until 2003 and because the RBC Dain Rauscher broker was no longer a “de factor” fiduciary after June 1999, the dispute was raised too late to meet the ERISA deadline.

According to Means’ ruling, broker J. Everett Airington was a “de factor” fiduciary until June 1999 because he was the primary maker of the plan’s investment decisions and strategy. The court noted that former president and owner Alfred J. Melillo let Airington decide how to invest the plan’s assets and relied solely on Airington to provide an investment strategy for the plan.

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Airington recommended that Melillo sign agreements authorizing the use of margin and option writing in the plan account, despite the fact that Dain Rauscher’s policies advised against the use of margin trading in ERISA accounts. According to the ruling, Airington switched the plan’s investments from mutual funds to riskier, more aggressive investments and began churning the account by engaging in frequent trading and a high number of trades that generated fairly significant commissions for Dain Rauscher.

Because of his margin trading, the court said, Airington ended up having to sell stock at inopportune times to cover margin calls.

The case is Hanlon v. Melillo, N.D. Tex., No. 4:03-CV-237-Y, 2/8/08.

Principal Integrates Consultant and RIA Support

The Principal Financial Group has adopted an integrated approach to support retirement plan consultants and independent registered investment advisers (RIAs).

The Principal previously focused on these two channels separately, but a unified team now provides support to both consultants and investment advisory firms who service mid-size and large plan markets, the company said. The team will focus on three key areas: corporate, non-profit, and Taft-Hartley plans, and will offer a comprehensive range of solutions including defined contribution, defined benefit, ESOP, non-qualified, investment only, and income solutions.

Team Members

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The integrated team is made up of three industry veterans: Chris Blair, Todd Dunaway and Cynthia LeMay.

The team will be lead by Blair who will also focus on the western region. Previously Blair worked for Union Bank of California in San Francisco as the national sales manager for retirement services. He has also held senior level positions with Charles Schwab & Co.’s retirement business, serving as the national sales director for Corporate and Retirement Services, and as the Western division sales director for New York Life Benefit Services.

Dunaway will focus on the central United States, encompassing the Midwest and South. Most recently, he led The Principal’s RIA practice. LeMay will focus on the Eastern United States. Before joing The Principal, LeMay was vice president, sales and marketing for Envive, Inc. She has also worked as senior regional sales manager for Northern Trust Retirement Consulting, and held additional senior level positions at Northern Trust including director of Participant Servicing and Defined Benefit manager.

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