The U.S. Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) has reached a settlement agreement with a subsidiary of Invesco Ltd., an Atlanta-based investment management firm.
Invesco Trust Company agreed to pay a total of $10.27 million to settle the department’s claims that Invesco Trust Company violated the Employee Retirement Income Security Act (ERISA).
Invesco operated the Invesco Short-Term Investment Fund (ISTIF), a multi-billion dollar collective fund composed of ERISA plan assets. The DOL contended that Invesco violated ERISA when it undertook a series of measures to ensure that the ISTIF continued to trade at $1 although the fund’s net asset value had fallen below $1 due to losses in the value of the fund’s securities holdings.
One measure Invesco took was having an affiliate enter into a series of support agreements to provide contingent financial support to the ISTIF without adequately informing the fund’s investors. Invesco also retained a portion of the income earned by the ISTIF to increase the fund’s net asset value instead of distributing that income to investors. Retaining a portion of the ISTIF’s income in the fund not only reduced the distributions to plan investors in the ISTIF, but also reduced the obligations of Invesco’s affiliate under the support agreements.
The DOL concluded that Invesco did not adequately disclose these measures to ERISA plan investors, and that Invesco’s actions resulted in losses to ERISA plan clients.
The settlement agreement addresses both of these findings by requiring Invesco to regularly disclose to ERISA plan investors the ISTIF’s holdings, its actual market value, and the existence of any supporting measures used to bolster the ISTIF’s net asset value. Additionally, Invesco must restore client losses that resulted from the ISTIF’s retention of income.Invesco has not responded to a request for comment.