The U.S. Department of Labor’s Employee Benefits Security Administration has reached a settlement agreement with Atlanta-based Invesco Trust Company, a subsidiary of Invesco Ltd., after the DOL found that Invesco Trust had violated the Employee Retirement Income Security Act by shoring up an investment fund without adequate disclosure to investors.

According to the agency, the fund in question was the Invesco Short-Term Investment Fund, a multibillion-dollar collective fund composed of ERISA plan assets. The DOL found that Invesco violated ERISA when it took steps to keep ISTIF trading at $1, despite the fact that the fund’s net asset value had fallen below $1 due to losses in the value of the fund’s securities holdings.

One of Invesco’s steps was a series of support agreements with an affiliate to provide contingent financial support to the ISTIF without adequately informing the fund’s investors. Invesco also kept some of the income ISTIF earned, rather than distributing it all to investors, so that it could increase the fund’s net asset value.

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Keeping part of the ISTIF’s income in the fund not only reduced the distributions to plan investors in the ISTIF, but also reduced the obligations of Invesco’s affiliate under the support agreements.

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The DOL found that not only was there inadequate disclosure to ERISA plan investors, but the firm’s actions resulted in losses to ERISA plan clients. The settlement agreement addresses both of these findings by requiring Invesco to regularly disclose to ERISA plan investors the ISTIF’s holdings, its actual market value, and the existence of any supporting measures used to bolster the ISTIF’s net asset value. Additionally, Invesco must restore client losses that resulted from the ISTIF’s retention of income.

The company was not available for comment by press time, but Invesco spokeswoman Jeaneen Terrio was quoted in the Atlanta Journal-Constitution saying that Invesco cooperated with the DOL investigation and “neither admitted nor denied wrongdoing.” She added that the company agreed to the settlement “to reach a resolution and put it behind us.”

Instant Insights /

Invesco to restore $10.27 million in investor losses

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