December 2006 Archives
401(k) Plan Fees and Expenses Lawsuits Continue to Proliferate
Over the past few months, numerous class action lawsuits have been filed against 401(k) plan sponsors and their officers, directors, and employees challenging the fees paid to plan service providers. Although many had hoped this most recent wave of 401(k) litigation would subside, it appears that several plaintiffs’ firms intend to launch another round of suits. The law firm that has instigated these suits in the past, Schlichter, Bogard & Denton, has already targeted 10 Fortune 200 companies and appears poised to go after at least 17 additional major corporations. Seattle-based Keller Rohrback, the firm responsible for the prosecution of most of the highprofile “stock drop” suits on behalf of 401(k) plan participants, recently announced that it is “investigating” at least two large plans on fees and expenses issues. Also throwing its hat into the fees and expenses ring is the plaintiffs’ class action firm SimmonsCooper, which reportedly has filed suit against Principal Life Insurance Company. The fact that these additional firms are investigating plans and filing suits suggests that fees and expenses litigation will not be the short-lived phenomenon that some had hoped or predicted.
SEC Proposes New Regulation R to Implement GLBA
On December 13, 2006, the SEC voted to propose Regulation R, which would implement the Gramm-Leach-Bliley Act (GLBA) provisions governing bank brokerage activities. Regulation R results from the Financial Services Regulatory Relief Act of 2006 (Regulatory Relief Act), which directed the SEC and the board of governors of the Federal Reserve System (FRB) to propose rules to implement the GLBA provisions. The FRB is scheduled to vote on the proposal on December 18, 2006, with a 90-day comment period to follow publication.
NASD’s Order Audit Trail System Reporting Requirements
Earlier this week, NASD issued Notice to Members (NTM) 06-70 to inform NASD member firms that: (1) the SEC has approved amendments to NASD’s Order Audit Trail System (OATS) Rules that expand the OATS reporting requirements to over-the-counter (OTC) equity securities; and (2) a new version of the OATS Reporting Technical Specifications (Technical Specifications) has been published to reflect these amendments and other technical enhancements required to support OTC equity security reporting to OATS. The effective date of the amendments to the OATS Rules, Technical Specifications, and OATS Production Environment is June 11, 2007. However, the enhanced OATS reporting systems will be accessible to NASD member firms in the OATS Testing Environment on April 30, 2007.
NASD Issues Guidance on Gifts and Gratuities
On December 4, 2006, NASD issued a notice reminding member firms of existing interpretive guidance, and also providing new guidance, regarding gifts and gratuities under Rule 3060. In Notice to Members (NTM) 06-69, NASD indicated that it was providing the guidance based on a recent review of member firms’ gift and gratuity practices. Specifically, NTM 06-69 provides guidance on the following issues: (1) the personal gifts exclusion, (2) the nominal value (de minimis) and promotional items exclusion, (3) aggregation of gifts, (4) valuation of gifts, (5) gifts incidental to business entertainment, and (6) supervision and recordkeeping.