Jan 16, 2020
Steven Lofchie and Nathan Bull comment on a Prudential affiliate recently agreeing to pay $1 million to settle claims that it misled retirement plan participants on fund costs, ratings and historical performance.
Excerpts from "Pru Affiliate to Pay $1M for Flubbing Expense, Performance Data," Ignites, January 16, 2020:
The settlement is indicative of a “controls case, not a fraud case,” says Steven Lofchie, a partner at Cadwalader, Wickersham & Taft.
That’s because there’s no sign of “deliberate misconduct or an intent by Prudential to steer people to certain plans or try to maximize fees,” says Nathan Bull, also a Cadwalader partner. And “the errors run both ways,” Bull notes. The firm both overstated and understated performance and cost data.
“If you had this amount of information and data deliberately tilting toward one direction, it’d be an entirely different case,” Lofchie says.
One takeaway for shops, says Lofchie, is that they should hire staffers with “enough sophistication to handle both the complexity of data, and the quality of data.” Fund expenses and performance can be exceedingly complicated to calculate, he adds.
“You have to mind the details of the business — this is getting the small things right,” he says.
Pro Bono Report 2019