Janus Henderson Sued for Allegedly Favoring Its Own Funds in 401(k) Plan

Asset manager Janus Henderson is being sued by one of its retirement plan participants, who alleges that the company breached its fiduciary duty by loading its 401(k) plan with poorly performing proprietary funds burdened by high fees.

According to a complaint filed in the U.S. District Court for the District of Colorado by Sandra Schissler, a participant in Janus Henderson’s retirement plan since 2012, the plan’s fiduciaries violated the Employee Retirement Income Security Act by not acting prudently or in the interest of plan participants and beneficiaries. During the class period, which is from 2016 through the end of 2021, the 401(k) plan had between 1,700 and 1,900 participants and approximately $246 million to $512 million in assets.

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“For investment management companies (like Janus Henderson), the potential for disloyal and imprudent conduct is especially high because the plan’s fiduciaries can benefit the company by stocking the plan’s investment menu with proprietary funds that a non-conflicted and objective fiduciary would not choose,” says the complaint.

The lawsuit alleges that rather than acting in the plan participants’ best interest, Janus Henderson used the plan to promote its proprietary investments to earn profits for the firm. According to the complaint, as of the end of 2021 the plan’s menu consisted of 50 investments, 40 of which were Janus Henderson Funds. It also alleges that the Janus Henderson Funds charged higher fees relative to nonproprietary alternatives selected by similarly sized plans. The lawsuit claims that annual investment fees paid by plan participants were at least 0.45% to 0.50% of total plan assets, which it says is “consistently higher” than the figure for the average 401(k) plan of similar size.

“An objective and prudent review of comparable investments in the marketplace would have revealed numerous available investments that were less costly and superior to the Janus Henderson Funds,” says the complaint. “While defendants’ disloyal and imprudent conduct generated significant profits for Janus Henderson, it has cost participants millions of dollars in excessive fees and lost investment returns.”

The lawsuit acknowledges that merely including proprietary funds in a plan’s investment menu is not a breach of fiduciary duty. However, it says that “based on defendants’ retention of proprietary funds over less expensive, superior nonproprietary funds, it is reasonable to infer that defendants’ process for selecting and monitoring the Janus Henderson funds was disloyal and imprudent.”

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Tags: 401(k), Class Action, Employee Retirement Income Security Act, ERISA, fiduciary duty, Janus Henderson, Lawsuits, proprietary funds, Sandra Schissler

The co-founder and CIO of a U.K.-based hedge fund has been charged in Manhattan federal court with manipulating exchange rates to fraudulently trigger a $20 million payment under a barrier options contract.

According to an unsealed indictment, Neil Phillips, the co-founder and CIO of Glen Point Capital, allegedly manipulated the exchange rate between the dollar and the South African rand to unlawfully obtain millions of dollars in payments for his hedge fund under an options contract. Although the indictment doesn’t refer to the hedge fund by name, Phillips has been cited as the CIO of Glen Point Capital in media reports, and it’s mentioned in his LinkedIn profile.

Federal prosecutors say that in October 2017, Glen Point purchased through a financial services firm a digital option for the dollar-rand currency pair that would expire on January 2, 2018. The option had a notional value of $20 million and a barrier rate of 12.50 rand to the dollar, which meant that the hedge fund would rake in a $20 million payment if the exchange rate went below 12.50 at any time before January 2.

When the rate failed to fall below the barrier rate with just a week remaining before the expiration date, Phillips allegedly artificially drove the exchange rate lower by engaging in spot trades in which he caused hundreds of millions of dollars to be exchanged for rand. Prosecutors allege that during the span of less than an hour Phillips personally directed a Singapore-based bank employee to sell a total of approximately $725 million in exchange for approximately just under 9.1 million rand.

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Phillips allegedly caused the exchange rate to drop sharply through his trading until it fell just below 12.50, and then immediately stopped trading as soon as it did. According to the indictment, Phillips explicitly directed the bank employee in Bloomberg chat messages to continue selling until the rate fell below 12.50. Within minutes of crossing the threshold, Phillips allegedly instructed a Glen Point employee to contact the financial services firm it bought the option from to confirm that the $20 million payment had been triggered.

“As alleged, Mr. Phillips maliciously manipulated global markets in order to defraud financial institutions for illicit profit,” Michael Driscoll, FBI assistant director in charge of the New York field office, said in a statement.

Phillips is charged with one count of conspiracy to commit commodities fraud, which carries a maximum sentence of five years in prison; one count of commodities fraud, which carries a maximum sentence of 10 years in prison; and one count each of conspiracy to commit wire fraud and wire fraud, each of which carry a maximum sentence of 20 years in prison.