Another 401(k) plan sues Fidelity over 'kickbacks'

Employee for advertising agency Publicis claims the record keeper received undisclosed payments from other fund companies

Apr 8, 2019 @ 2:20 pm

By InvestmentNews

A participant in the Publicis 401(k) retirement plan has filed a class-action lawsuit against Fidelity Investments, charging that the record keeper received kickbacks from other fund companies whose funds are offered in the program.

The suit, filed in the U.S. District Court for the District of Massachusetts, charges that beginning on or about 2017, Fidelity began requiring that various fund companies and others offering investment products through the plans for which Fidelity provided record keeping "make secret payments to Fidelity for its own benefit in the guise of 'infrastructure' payments or so-called relationship-level fees in violation of the Employee Retirement Income Security Act."

More: 401(k) managed accounts becoming more diverse

The suit asks that the court grant the plaintiffs, who work for the U.S. arm of a French-based advertising and marketing firm, a judgment saying that Fidelity violated ERISA, and enjoining it from continuing the practices in question.

The suit also asks for a permanent injunction against Fidelity and disgorgement or restitution of all the payments and other compensation it charges Fidelity with receiving improperly — or the profits earned by Fidelity in connection with its receipt of those payments. It also asks for unspecified compensatory damages.

In response to similar suits recently filed, Fidelity spokesman Michael Aalto denied allegations of kickbacks, and said Fidelity "intends to defend itself vigorously."

"Fidelity fully complies with all disclosure requirements in connection with the fees that it charges, and any assertion to the contrary is not only misleading, but simply false," Mr. Aalto said recently.

He also defended Fidelity's practice of charging an infrastructure fee to fund firms, saying the systems and processes required for record keeping, trading and settlement, communications, and support for customers over the phone and online is costly to maintain. The fee, Mr. Aalto said, is not charged to plan sponsors or participants.

0
Comments

What do you think?

View comments

Most watched

Events

Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.

Events

Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

SEC sets June 5 date for vote on Regulation Best Interest

Commission adds new item to agenda: Interpretation of broker guidance that qualifies as advice

House passes SECURE retirement bill with massive bipartisan support

The measure allows small employers to band together to offer plans and raises the RMD age. Another provision eases use of annuities in 401(k)s, which critics say goes too far

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

DOL sets date to propose new fiduciary rule

The regulation, expected in December, likely will be contoured to the SEC's new advice standards.

LPL expanding platform to include employee brokers

The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print