Invesco Trust Co. agreed Friday to pay $10.27 million to the Department of Labor to settle claims that the company violated the Employee Retirement Income Security Act by not disclosing losses to investors when its Invesco Short-Term Investment Fund’s NAV dropped below $1.

Invesco Trust is a subsidiary of Invesco Ltd., an Atlanta-based investment management firm; the Invesco Short-Term Investment Fund (ISTIF) is a multibillion-dollar collective fund composed of ERISA plan assets.

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 a series of support agreements to provide contingent financial support to the ISTIF without adequately informing the fund’s investors, DOL states.

“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,” according to DOL.

The department 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. 

Under the settlement terms, Invesco must 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.

Also, Invesco must restore client losses that resulted from the ISTIF’s retention of income.

Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, said that the “settlement is another example of the department holding accountable those who do not adequately disclose to their investors information that is relevant to their investment decisions.” Invesco Trust, she said, “stepped up to the plate by agreeing to compensate their ERISA plan clients.”

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