Putnam Proprietary Fund Suit Moves Forward

Noting that, “it is clear from the record that there are genuine issues of material fact in dispute,” a proprietary fund lawsuit has been cleared for trial.

The case is Brotherston v. Putnam Investments, LLC (D. Mass., No. 1:15-cv-13825-WGY, 3/3/17), and it was filed just over a year ago against Putnam Investments by participants in that plan, alleging that the defendants “have loaded the Plan exclusively with Putnam’s mutual funds, without investigating whether Plan participants would be better served by investments managed by unaffiliated companies.”

The suit claimed that that the defendant’s actions cost “Plan participants millions of dollars in excess fees every year,” going on to claim that in 2013 “the Plan’s total expenses were 66% higher than the average retirement plan, with between $500 million and $1 billion in assets (the Plan had $589 million in assets as of the end of 2013), costing Plan participants at least $1.72 million in excess fees in 2013 alone.”

The suit also claimed that the plan fiduciaries “have failed to remove poorly performing investments from the Plan, in breach of their fiduciary duties,” and “have no process for selecting mutual funds for the Plan, indiscriminately adding every mutual fund that Putnam offers into the Plan.”

However, in making his decision, District Judge William G. Young noted that those genuine issues of material fact in dispute existed with regard to just three of the plaintiff’s counts and the defendants’ fifth affirmative defense. Judge Young also note that the court held a hearing with regard to two other counts raised by the plaintiffs, and that it planned to “issue its findings of fact and rulings of law as to these Counts in due time.”

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