A Manhattan federal court judge has ruled in favor of Morgan Stanley in a suit brought against the wirehouse accusing it of offering too many of its own funds, as well as underperforming BlackRock funds, in its 401(k) plan, according to news reports.
The suit contended that Morgan Stanley had breached its duty of loyalty and prudence in its choice of options on the menu for its 401(k) plan participants.
Judge Richard J. Sullivan granted Morgan Stanley's motion to dismiss the suit filed in 2016, which accused the firm of putting these funds on the menu as well as failing to remove certain underperforming funds, charging excessive fees for advisor and fund administration services and failing to supervise the plan’s fiduciaries, FA-IQ sister publication Ignites writes.
The plaintiffs themselves had only invested in fewer than half of the proprietary and BlackRock funds, Sullivan said, according to Ignites.
“[The Employee Retirement Income Security Act] does not require clairvoyance on the part of plan fiduciaries, nor does it countenance opportunistic Monday-morning quarterbacking on the part of lawyers and plan participants who, with the benefit of hindsight, have zeroed in on the underperformance of certain investment options," Sullivan said, according to Ignites.
Other claims lacked evidence, according to the order cited by the publication.
For example, the funds the plaintiffs claimed should have been removed didn’t have large enough discrepancies from their benchmarks to meet the standard of imprudence, Sullivan said, according to Ignites.
The plaintiffs, represented by Sanford Heisler Sharp, have 30 days to appeal, the publication writes.