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April 16, 2012 at 09:50 AM
The Department of Labor’s Employee Benefits Security Administration (EBSA) announced Monday that it had fined Morgan Keegan, the troubled broker-dealer recently acquired by Raymond James, for violating its fiduciary obligations in recommending certain hedge funds of funds as investments to pension plans in return for revenue sharing payments.
According to EBSA, Morgan Keegan and Co. Inc. has agreed to pay $633,715.46 to 10 pension plans covered by the Employee Retirement Income Security Act (ERISA) following an investigation by EBSA that found the full-service brokerage company violated federal law when it recommended certain hedge funds of funds as investments to its ERISA-covered employee benefit plan clients.
These recommendations resulted in the hedge funds paying Morgan Keegan revenue-sharing and other fees, EBSA says.
Phyllis Borzi, assistant secretary of labor at EBSA, said in announcing the fine that “The law is very clear: If you accept a fee to give investment advice to a retirement plan, you are a fiduciary and must therefore act solely in the best interests of the participants in that plan.” Third-party payments, she said, “should never be the motivating factor behind which investments brokers and advisors steer retirement clients into.”
