Compliance January 3, 2011

Wilmington Trust Targeted in 401(k) Investigation

Looks like the New Year is going to kick off on a litigious note. 

 

Reported by

Bright and early Sunday morning, the law firm of Stull, Stull & Brody announced that it has commenced an investigation relating to the 401(k) defined contribution retirement plan of Wilmington Trust Corporation.   

According to the press release, Stull, Stull & Brody says that “among other things,” it is investigating “whether fiduciaries of the Wilmington Trust Thrift Savings Plan, a 401(k) plan, may have violated the Employee Retirement Income Security Act of 1974 (“ERISA”) by failing to disclose the Company’s true operating condition to participants and beneficiaries of the plans (including disclosures relating to the Company’s eroding loan quality, the heavy concentration of the Company’s loans in areas experiencing loan troubles, and growing cash shortages), by offering Company stock as an investment option under the plan when it was not prudent to do so, and/or by allowing an imprudent overconcentration of Company stock in the Company’s 401(k) plan.” 

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As is customary in such announcements, the law firm proceeds to note that those who held Wilmington Trust stock in an individual account in the Wilmington Trust Thrift Savings Plan or employee stock purchase plan “…may, if you wish, consult with a representative of Stull, Stull & Brody at no cost or obligation.”

You can read more about the so-called “stock drop” suits in PLANSPONSOR’s magazine article, “It’s a Jungle Out There.” 

In Practice January 3, 2011

Most Investors Do Not Know What ETFs Are

Mintel Comperemedia, a marketing research firm, predicts that exchange-traded fund (ETF) assets will experience double digit growth over the next five years. 
Reported by

As a result of its research into ETFs, Mintel believes that providers of ETFs have huge potential for growth, due to the fact that the majority of retail investors (60%) are still unfamiliar with the product. Even investors who do have ETFs as a part of their portfolios are not entirely sure how the product works; 54% said they feel “very knowledgeable” about investing with ETFs.    

Despite the growing popularity of ETFs in the last few years, providers still have obstacles to overcome; Mintel found that only 17% of existing investors in mutual funds and individual stocks reported feeling comfortable with ETFs.

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Susan Menke, vice president and behavioral economist at Mintel Comperemedia, said in a press release that one reason ETFs have not saturated the market as deeply as mutual funds is that they are not commonly offered in qualified plans such as 401(k)s, and even those who have ETFs in non-retirement accounts are still unfamiliar with this type of investment.

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