Waddell & Reed Agrees to Pay $4.9M Over Alleged Self-Dealing in 401(k) Plan
Waddell & Reed has agreed to settle a lawsuit alleging it stuffed its 401(k) plan with in-house products, according to news reports.
The company has agreed to pay $4.9 million to settle a class action suit filed in the U.S. District Court for the District of Kansas in June 2017, InvestmentNews writes. That suit alleges the asset manager used its own proprietary funds exclusively in its workers’ 401(k) plan without even considering lower-cost and better-performing alternatives, according to the publication. The settlement must still be court approved, InvestmentNews writes.
"Although there are strong defenses to the alleged claims and defendants deny any and all liability with respect to the allegations, all parties have determined that settlement is in the best interests of the litigants, the Plan and the settlement class members," Roger Hoadley, Waddell & Reed’s spokesman, tells the publication.
The suit against Waddell & Reed is just the latest accusing investment management firms of self-dealing. Fidelity Investments faces its second suit, filed in the U.S. District Court for the District of Massachusetts last month, alleging it favored its own proprietary mutual funds at the expense of its 401(k) plan participants.
Fidelity had settled a similar suit for $12 million four years ago. And in August, Wells Fargo scored a win in the courts when a panel of judges upheld a previous ruling dismissing a lawsuit alleging the firm steered its employees to proprietary products.
The same month, however, Citigroup settled a $6.9 million lawsuit accusing it of putting its employees’ retirement savings in expensive and underperforming products overseen by the firm at its one-time affiliates Smith Barney and Salomon Brothers.