PLANADVISER - September/October 2022 - 9

received a letter from several interested
persons requesting this extension.
As summarized by EBSA, the QPAM
exemption amendment would provide
" important protections " for plans
and individual retirement account
owners by clarifying that the exemption's
ineligibility provision applies to
foreign convictions, including additional
types of serious misconduct
in the ineligibility provision. The
amendment also provides for a oneyear
period for plans and individual
retirement account owners to conduct
an " orderly wind-down " if they chose
to terminate their relationship with
a newly ineligible QPAM. Further,
the amendment updates the asset
management and equity thresholds
in the definition of " qualified professional
asset manager. "
Puerto Rican Union Pension
Receives PBGC Relief
The latest plan to receive relief from
the Pension Benefit Guaranty Corporation
is the Gastronomical Workers
Union Local 610 and Metropolitan
Hotel Association Pension Fund. Based
in San Juan, Puerto Rico, the pension
covers over 2,600 participants in the
hospitality industry. When the GWU
Local 610 Plan became insolvent, a year
ago June, the PBGC started providing
financial assistance to it. In all, the
plan will receive $28.3 million in aid,
including interest to the expected date
of payment to the plan.
7th Circuit Rules
In Boeing MAX Case
The 7th U.S. Circuit Court of Appeals
in Chicago, August 1, upheld a lower
court's dismissal of a case brought
against Boeing in 2019 over the drop in
Boeing's stock price. The appeals court
found that the Boeing defendants were
not fiduciaries under the Employee
Retirement Income Security Act,
because an independent firm managed
the company stock fund in the Boeing
Co. Voluntary Investment Plan. The
independent fiduciary, Newport Trust
Co., had managed the employee stock
ownership plan since 2007 and was not
the subject of litigation.
" This decision has particular importance
to plan sponsors and fiduciaries
that have employer stock as an investment, "
says Allison Itami, partner and
co-chair of the plan sponsor group at
Groom Law Group.
" It definitely supports the decision
to use an independent fiduciary when
there might be conflicts of interest
about inside information. "
The court wrote that Boeing had
clearly delegated to Newport decisions
about the ESOP-including whether
to allow the plan and employees to
continue to hold employer stock-and
whether to let employees keep making
new investments in it.
In making those decisions, the
court ruled, Newport was not a Boeing
insider and not privy to inside information
related to the two major crashes
of Boeing 737 MAX series airplanes.
" [Newport] was making decisions like
any outside investor, " the judges wrote.
The plaintiffs had sued Boeing, its
investment committee and some executives,
arguing that Boeing's leadership
had known about the potential issues
with the airplanes since 2010 and
should have foreseen and addressed
how those crashes would have led to
the drop in Boeing's stock price.
The
plaintiffs
argued
that
the
continued provision of employer
stock during the period represented
an ongoing fiduciary breach since
the defendants should have acted to
protect plan participants' balances.
Boeing's share price fell by over $65
a share-i.e., from $442.54 to $375.21-
over four days when the company's
planes were grounded in 2019.
The judges in the most-recent
ruling wrote that, by delegating investment
decisions in the ESOP to an independent
fiduciary,
" neither
Boeing,
nor
the other defendants, acted in an
ERISA fiduciary capacity in connection
with the continued investments. "
The judges said they recognized that
Boeing delegated its fiduciary duty
to eliminate claims about company
insiders' conflict of interest.
" We see no legal barrier to such a
delegation, and decades of ESOP stockdrop
litigation have provided powerful
reasons for employers and fiduciaries
for ESOPs to take this step, " they wrote.
SEC Charges Firms With
Recordkeeping Violations
The Securities and Exchange Commission
announced, September 27, that
it has charged 15 broker/dealers and
one affiliated investment adviser with
" widespread and longstanding
failures
by the firms and their employees
to maintain and preserve electronic
communications. "
According to the agency's press
release, a staff investigation uncovered
pervasive off-channel communications.
The firms cooperated with
the investigation by gathering communications
from the personal devices
of a sample of the firms' personnel,
including senior and junior investment
bankers and debt and equity traders.
From January 2018 through
September 2021, the firms' employees
routinely communicated about business
matters via text messaging on
their personal devices and deleted
the substantial majority of these offchannel
communications, in violation
of the federal securities laws, the
release states.
It also says the firms, by eliminating
these required records, likely deprived
the SEC of off-channel communications
in various agency investigations.
The failings occurred across all of the
16 firms and involved supervisors and
senior executives.
The firms admitted to and acknowledged
the facts set forth in the SEC
orders, and agreed to pay the penalties,
over $1.1 billion in total; they
have begun implementing pertinent
improvements to their compliance policies
and procedures, the release states.
Further, each firm was ordered to
cease and desist from future violations
of the relevant recordkeeping
provisions and were censured, the
release states. The firms also agreed to
have compliance consultants conduct
comprehensive reviews of their policies
and procedures for retaining
electronic communications found on
personal devices and for addressing
noncompliance.
Separately, the Commodity Futures
Trading Commission has
also
announced
settlements with the firms
for related conduct. -PA
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PLANADVISER - September/October 2022

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