Investment Monitoring, Post Supreme Court Decision

As mentioned in "ERISA Litigation and Investment Monitoring" (October 22, 2015), Dr. Susan Mangiero, Attorney James Fleckner and Dr. Lee Heavner will discuss economic and governance ramifications of the U.S. Supreme Court "Tibble" decision on December 3, 2015 from 11:00 am to 12:30 pm EST.

To register for this educational webinar entitled "Life After Tibble: Investment Monitoring and Litigation Defense Considerations for ERISA Fiduciaries," click here. The sponsor, Bloomberg BNA, has arranged for continuing legal education ("CLE") credits to be offered.

Educational objectives are listed below:

  • Identify the main tenets of the Tibble decision and understand the implications of likely future litigation and enforcement;
  • Distinguish investment monitoring done in-house or by third parties;
  • Discover preemptive measures for effective investment monitoring;
  • Learn how to mount a defense against lawsuits; and
  • Cover the components of economic damage estimates as part of an investment monitoring lawsuit or regulatory enforcement action.

Given the importance and relevance of the topic, there are numerous individuals who can benefit by attending this program such as:

  • Asset manager and financial service company attorneys;
  • Auditors;
  • Banks that sell to ERISA plans;
  • Corporate board members;
  • Corporate counsel;
  • ERISA fiduciaries;
  • ERISA fiduciary liability insurers;
  • ERISA litigators;
  • ERISA transactional attorneys;
  • Financial analysts;
  • Financial regulators;
  • Financial industry journalists;
  • Investment advisors and consultants;
  • Mutual fund directors;
  • ERISA plan policymakers; and
  • ERISA plan researchers.

ERISA Litigation and Investment Monitoring

Please save the date for an educational program entitled "Life After Tibble: Investment Monitoring and Litigation Defense Considerations for ERISA Fiduciaries." Produced by Bloomberg BNA, this webinar event will take place on December 3, 2015. Speakers are listed below:

  • James O. Fleckner, Esquire - Chair - ERISA Litigation, Goodwin Procter LLP;
  • Dr. D. Lee Heavner - Managing Principal, Analysis Group, Inc.; and
  • Dr. Susan Mangiero - Managing Director, Fiduciary Leadership, LLC.

In the aftermath of the U.S. Supreme Court "Tibble" decision, there are numerous questions as to what exactly comprises effective investment monitoring from a procedural prudence perspective. Given the newness of this important legal decision and little formal guidance from the High Court, the panel will present economic perspectives about what ERISA fiduciaries should do to assess, and possibly improve, their current investment monitoring process. Attention will be paid to related topics that include the delegation of investment monitoring to third parties (such as advisors, asset managers and consultants) and the kinds of information that should be communicated to plan participants about investment monitoring activities. The role of the economic expert and the factors that need to be considered in estimating damages will be addressed, along with a discussion of available industry resources. The panel will use examples from casework to illustrate some of the key points.

Further details will be posted shortly.

Investment Fiduciary Monitoring, Economic Damages and Tibble

Following the publication of "An Economist's Perspective of Fiduciary Monitoring of Investments" by yours truly, Dr. Susan Mangiero (Pensions & Benefits Daily, May 26, 2015), I decided to write a second article on the topic as there is so much to say. This next article is co-authored with Dr. Lee Heavner (managing principal with the Analysis Group) and continues the discussion about investment monitoring from an economic viewpoint. Entitled "Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court's 'Tibble' Ruling" (Pensions & Benefits Daily, June 24, 2015), we address the case-specific nature of investment monitoring by fiduciaries and the complexities of quantifying possible harm "but for" alleged imprudent monitoring.

Noting the discussion of changed circumstances by the High Court as part of its Tibble v. Edison International decision, it is imperative to understand that investment monitoring involves multiple steps, each of which takes a certain number of days to complete. "In the world of dispute resolutions, every complaint, expert report, and decision by a trier of fact is specific to a date or period of time. Time is no less a crucial variable with regard to the creation and implementation of an adequate investment monitoring program." While "changed circumstances" are likely to vary across plans and plan sponsors, exogenous events can spur further monitoring. "The departure of a key executive, a large loss, or a government investigation for malfeasance are a few of the events that may lead plan fiduciaries to subject an investment to enhanced scrutiny."

The expense of monitoring is another issue altogether, one that is nuanced, important and necessary to quantify. We point out that (a) there are different types of costs (b) expenses occur at different points in time and (c) some costs may be difficult to assess right away. "For example, when monitoring leads to a change in vendor or investment that in turn results in participant confusion, blackout dates, account errors, or a lengthy delay in setting up a new reporting system, the true costs may not be known until well after the transition is completed."

There are no freebies. There is a cost to taking action as the result of monitoring. There can be a cost to inaction as well. Investment selection and investment monitoring are different activities. Categories of investment monitoring costs include: (a) use of third parties (b) search costs (c) change costs and (d) opportunity costs. Any or all of these categories may come to bear in a calculation of "but for" economic damages. As a result, "there may be substantial variation to when prudent fiduciaries would act let alone how long it would take an investment committee to complete each action." An assessment of economic damages - whether for discovery, mediation, settlement or trial purposes - requires care, consideration and an understanding of the complex investment monitoring process.

For further insights and to read about this timely topic, download our article by clicking here.