Pressure is mounting on the U.S. Labor Department to back off its guidance against cryptocurrency investing because its implication for future brokerage window regulations has already imperiled one class action settlement.
The potential consequences of the anti-crypto guidance, issued by the department last month, have already prompted global money manager T. Rowe Price Group Inc. to pump the brakes on an $18 million class action settlement agreed to in January.
The windows, which give workers access to the broader investment market through tax-advantaged retirement plans, are becoming a routine concession as plan sponsors fend off a rising tide of excessive fee lawsuits, such as the one resolved by T. Rowe. But companies could be less willing to settle on those grounds if the Labor Department tightens its regulatory controls on them...
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...Brokerage windows often serve as pawns in excessive fees suits, as a defense against allegations that investment options are too narrow or as proof that plan sponsors are offering too many.
Six colleges and universities were targeted by a suite of lawsuits in 2016 claiming that the hundreds of options under brokerage windows those employers offered in their plans led to “decision paralysis” among investors.
But in cases where employers have offered too few indistinguishable investments, brokerage windows can appease participants wanting more options to diversify their portfolios.
“Adding a window allows participants to better control the investment universe in some way in their plans on a going-forward basis that didn’t exist prior to the litigation,” said Jorge Leon, a partner at Michael Best & Friedrich LLP in Chicago.
Windows giving participants access to more of Wall Street allow employers to offer up a non-monetary element in a costly suit and may be a last resort when plaintiffs’ allegations have arguably gone too far...
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