The U.S. Department of Labor is looking into whether JPMorgan Chase & Co violated its fiduciary duty under the Employee Retirement Income Security Act in connection with one of its stable value funds.
Stable value funds are used in 80 percent of 401(k) self-directed retirement plans and are meant to be the most conservative choice for employees - liquid and backed by insurance.
But, the $1.8 billion JPMorgan Stable Asset Income Fund has had as much as 13 percent of its assets invested in private mortgage debt underwritten and rated by the bank itself. It has reduced that to just under 4 percent, as of June 30, according to a spokesperson.
Many employers with 401(k) plans were unaware of the private mortgage component of the fund until after the 2008 market crash, according to retirement plan consultants who worked with companies that held the portfolios.
Over the past several weeks, the Labor Department has been examining whether the New York-based bank breached its fiduciary responsibilities under ERISA, according to two people with direct knowledge of the situation who declined to be named because of the sensitivity around discussing potential investigations.
One source, who had been contacted by the Labor Department about the JPMorgan fund, said he did not know if the Labor Department had begun a formal investigation or was still in the exploratory process.
"If it's not a formal investigation, it's pretty damn close," the person said.
Read more: http://www.reuters.com/article/2012/07/21/us-labor-jpmorgan-idUSBRE86J1B720120721
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