Reported probe into stable-value fund could upend advisers

A reported inquiry by the Labor Department into a JPMorgan Chase & Co. stable-value fund could put financial advisers in the cross hairs. The federal agency is questioning whether the firm committed a fiduciary breach under the Em-ployee Retirement Income Security Act of 1974, according to a Reuters report. The Labor Department could be examining whether the fund holds investments that are inappropriate and whether such risks were disclosed, according to Reuters. Reuters noted that the JPMorgan Stable Asset Income Fund once held as much as 13% of its assets in private-mortgage debt that is rated and underwritten by the firm. That weighting has been reduced to 4%. Kristen Chambers, a spokeswoman for J.P. Morgan Investment Management, declined to comment. Michael Trupo, a spokesman for the Labor Department, said that he could neither confirm nor deny the existence of any investigation. If the DOL finds that the firm violated ERISA with respect to the investments within the fund, plan sponsors and advisers who recommended it to 401(k) plans could be on the hook for failure to perform the proper due diligence.

BEYOND PERFORMANCE

“The question is: How did this stable-value fund get here, and who is looking under the hood?” asked Jason C. Roberts, chief executive of the Pension Resource Institute. “We are constantly telling clients that it's not just enough to look at performance,” said Michael J. Francis, president of Francis Investment Counsel LLC. “Prudent fiduciaries look under the hood to understand what the investment manager is invested in to better protect participants from expected blowups from highly volatile, risky or illiquid securities,” he said ERISA experts noted that the amount of responsibility that falls on the adviser and plan sponsor typically depends on the amount of information available to the plan fiduciaries. [email protected] Twitter: @darla_mercado