RETIREMENT FIDUCIARIES BREACH BY INVESTING YOUR MONEY WITH HEDGE FUNDS?

Image by Shepard's/McGraw-Hill.

What kind of E&O coverage might they have?

Christopher M. Sulyma filed a lawsuit because his 401(k) was being invested in "hedge funds and private equity".  He sued his employer, Intel Corporation, and its board of directors alleging that when they invested his 401(k) in "hedge funds, private equity portfolios and commodities," they breached their fiduciary duties in managing his money in his retirement plan.  Mr. Sulyma's lawsuit was filed recently, so we do not have much of a record at this time.  Previous lawsuits filed over 401(k) investing represent "an increasingly successful line of actions brought against companies offering 401(k) plans to their workers."  The new wrinkle presented by Mr. Suylma's lawsuit is reportedly because "[a]t its heart is this question:

Should hedge funds, private equity portfolios and commodities be anywhere near a 401(k) plan?

See Gretchen Morgenson, "Business Day / Fair Game / Intel Lawsuit Questions Place of Hedge Funds in Retirement Plans" (New York Times Online, posted November 20, 2015).

Other questions arise, questions which all have implications for the kinds of insurance that Directors and Officers and 401(k) investors and managers might buy, if they need to buy any:

• What is the status of claims against people responsible for investing public employees' pension funds in hedge funds?
• What is the standard of liability, if any, which such people must meet while investing public pension funds? Fiduciary?  Negligence?  Any?
• Do they succeed in claiming immunity from liability, these investors of other people's pension money in hedge funds?

I looked and found the Sulyma lawsuit style, Case Number, and Court.  The lawsuit is Sulyma v. Intel, Case No. 5:15-cv-049777, Northern District of California.  I plan to follow it.  I will let you know what happens as it happens in that case (more or less).

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  All rights reserved. Here is a Podcast on Thomson Reuters Legal Currents of the Author reading excerpts from "Litigation and Prevention of Insurer Bad Faith".  In it is a link to a YouTube video and 68 Powerpoint slides on "Lender Force-Placed Insurance Practices" and links to handouts of the Sections of the Book which are featured on the Podcast.