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Compliance November 23, 2016
Another Plan Challenged for Offering Sequoia Fund
The lawsuit alleges the Sequoia Fund was an imprudent investment for the retirement plan because of its high concentration in Valeant Pharmaceuticals stock.
Reported by Rebecca Moore
Participants in the FMC Corporation Savings and Investment Plan have sued the firm and the plan over the plan’s offering of the Sequoia Fund.
According to the complaint, the Sequoia Fund is a high-cost mutual fund run by adviser Ruane, Cunniff & Goldfarb and its portfolio managers, Robert D. Goldfarb and David M. Poppe. The lawsuit claims the plan’s fiduciaries breached their Employee Retirement Income Security Act (ERISA) duties by continuing to offer the fund, because it was not diversified. The complaint says the fiduciaries should have known that throughout 2015—in violation of the plan’s investment policies regarding concentration and in spite of the concerns of fund shareholders—the Sequoia Fund’s assets were concentrated in a single stock: Valeant Pharmaceuticals, Inc.
The fund was the largest shareholder in Valeant in 2015, owning nearly 10% of Valeant, and Valeant represented more than 30% of the fund’s total assets, according to the lawsuit.
The lawsuit seeks losses to the plan on behalf of all participants and beneficiaries of the plan during the proposed class period.
In another lawsuit questioning Disney’s offering of the Sequoia Fund as an investment in its retirement plan, a federal court in California dismissed the charges, finding that participants had not plausibly alleged that the plan’s fiduciaries were responsible for monitoring the underlying investments in the mutual fund.