QuestionQuestion

Answer the following questions analyzing for the issue, rule, application and conclusion:

(1) Did investing in MBS violate the Plan Document requirement to minimize risk, which would in turn be a violation of 29 U.S.C. § 1104(a)(1)(D)? Specifically, the Plan Document begins by stating that "The investment goal of the portfolio is to provide Company with a strategic allocation of investments that minimize risk . . . ." However, the Trustees are not clear what the Plan Document would prohibit as too risky?

(2) Did investing twenty percent (20%) of the Plan in MBS violate the Plan Document's diversification requirement, in turn violating 29 U.S.C. § 1104(a)(1)(D)?

(3) Did investing in the MBS violate the prudent man standard set forth in 29 U.S.C. § 1104(a)(1)(B)?

(4) Did not selling the MBS sooner violate the prudent man standard set forth in 29 U.S.C. § 1104(a)(1)(B)?

(5) Does the fact that D&C's managing partner's son, Larry, worked at the underwriter that was handling the MBS offering, Bear Stearns, implicate 29 U.S.C. § 1104(a)(1)(A)?

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(1) Did investing in MBS violate the Plan Document requirement to minimize risk, which would in turn be a violation of 29 U.S.C. § 1104(a)(1)(D)? Specifically, the Plan Document begins by stating that "The investment goal of the portfolio is to provide Company with a strategic allocation of investments that minimize risk . . . ." However, the Trustees are not clear what the Plan Document would prohibit as too risky?
Issue:
Whether D&C violated the Plan Document requirement, and in turn 29 U.S.C. § 1104(a)(1)(D) by investing in MBS.
Rule:
Investment managers are charged with making investments in accordance with documents and instruments governing the plan insofar as the plan documents are consistent with the provisions of ERISA. 29 U.S.C. § 1104(a)(1)(D). Investments are limited to holdings which would be permitted under the prudent man rule as set forth in the Employee Retirement Income Security Act of 1974. Laborers National Pension Fund, v. Northern Trust Quantitative Advisors, Inc., 173 F.3d 313, 317 (5th Cir. 1999)....
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