Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
Merrill Lynch, Pierce, Fenner & Smith Inc. will pay $25 million to settle a lawsuit that accused the broker-dealer firm of profiting from excessive fees charged to small 401(k) plans ( Fernandez v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , S.D. Fla., No. 1:15-cv-22782-MGC, motion for preliminary approval of class settlement filed 6/8/17 ).
The settlement will make class members whole by paying them 100 percent of their losses, according to an unopposed motion for preliminary approval of class settlement filed June 8 in federal court in Florida. The deal features a “corrective remediation payment” totaling at least $8.8 million and a “disgorgement payment” of $16.2 million, the motion said. Class counsel will request attorneys’ fees equal to 35 percent of the settlement payment, or $8.75 million, the motion said.
The settlement, if approved by the court, will end a two-year litigation dispute between the broker-dealer and trustees of two retirement plans that held accounts with Merrill Lynch—the LAAD Retirement Plan and the LAAD Corp. S.A. Money Purchase Retirement Plan.
The trustees accused Merrill Lynch of breaching its Employee Retirement Income Security Act fiduciary duties by charging excessive fees on smaller retirement plans in connection with the purchase of mutual fund shares that allegedly should have been purchased at discounted rates. The deal comes months after Judge Marcia G. Cooke issued a one-page order denying Merrill Lynch’s motion to dismiss.
“We think the settlement makes sense for both sides,” class counsel Frank Rodríguez of Rodriguez Tramont & Nunez P.A., told Bloomberg BNA June 9. The proposed settlement balances the risks, costs, and uncertainties of continued litigation with the certainty of benefits that provide substantial, meaningful recovery that makes the class whole while also providing a distribution of millions of dollars of disgorged profits, the motion said. The payments are adequate and very close to, or even more than, what might have been possible to obtain through extended litigation and trial, the motion said.
Approximately 39,000 class members will be made 100 percent whole by the settlement, Rodriguez said.
The trustees’ lawsuit came after Merrill Lynch entered into a letter of acceptance with the Financial Industry Regulatory Authority in which the firm acknowledged its failure to provide appropriate sales charge waivers for mutual fund purchases by small-business retirement accounts. At the time, Merrill Lynch made a remediation payment of $79 million. Believing the payment was insufficient to cover their losses, the LAAD plans’ trustees sued Merrill Lynch.
Merrill Lynch declined to comment.
Levine Kellogg Lehman Schneider & Grossman LLP also represented the class. Morgan Lewis & Bockius LLP represented Merrill Lynch.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the motion for preliminary approval of class settlement is at http://www.bloomberglaw.com/public/document/Fernandez_v_Merrill_Lynch_Pierce_Fenner__Smith_Incorporated_Docke/3?doc_id=X1Q6NSE3RKO2&imagename=178-1.pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)