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GOOD MORNING EVERYONE.[ROLL CALL]
MADAM CLERK, CAN YOU PLEASE CALL THE ROLL? DIRECTOR COFFEY.HERE. DIRECTOR. MERCURIO HERE.
HERE. GENERAL MANAGER SABRINA LANDRETH.
HERE. GENERAL COUNSEL BOURGAULT.
HERE. TODAY'S MEETING IS HELD PURSUANT TO THE BROWN ACT.
THE MEETING IS HELD IN A STUDY SESSION FORMAT TO ENCOURAGE BOARD MEMBER COMMENT AND DISCUSSION.
THEREFORE, ANY ITEMS REQUIRING FORMAL BOARD ACTION WILL BE REFERRED TO THE FUTURE BOARD OF A FUTURE BOARD OF DIRECTORS MEETING FOR CONSIDERATION, WE ARE PROVIDING LIVE AUDIO AND VIDEO STREAMING.
MEMBERS OF THE PUBLIC WISHING TO MAKE A PUBLIC COMMENT CAN DO SO LIVE VIA ZOOM, BY SUBMITTING AN EMAIL IN PERSON AT EAST BAY REGIONAL PARK DISTRICT ADMINISTRATIVE HEADQUARTERS IN OAKLAND, OR BY LEAVING A VOICEMAIL.
THIS INFORMATION IS NOTED ON THE AGENDA.
IF THERE ARE NO QUESTIONS ABOUT MEETING PROCEDURES, WE WILL BEGIN.
WOULD SOMEONE LIKE TO MAKE A MOTION TO ACCEPT THE AGENDA FOR OUR SPECIAL MEETING THIS MORNING? SO MOVED. OKAY.
ALL IN FAVOR? AYE. OPPOSED? OKAY. MOTION PASSES.
[BUSINESS BEFORE THE BOARD]
PRESIDENT ECHOLS, I'D LIKE TO INTRODUCE OUR OUTSIDE COUNSEL ED BERNARD.HE'S WITH THE FIRM OF HANSON BRIDGETT, AND HE HAS A PRESENTATION HERE FOR THE BOARD TODAY.
THANK YOU, LYNNE; APPRECIATE IT.
[CHUCKLING] MY NAME IS ED BERNARD, AND I AM WITH HANSON BRIDGETT, AND I AM THE DISTRICT'S OUTSIDE EMPLOYEE BENEFITS COUNSEL, AND I'M HERE TODAY TO TALK TO YOU ALL ABOUT GOVERNMENTAL, WELL, WHAT A GOVERNMENTAL DEFINED CONTRIBUTION PLAN FIDUCIARY IS AND WHAT IT MEANS TO BE ONE.
SO HERE'S OUR AGENDA FOR TODAY, AND WITHOUT FURTHER ADO, LET'S GET STARTED.
SO FIRST I'M GOING TO START OUT WITH A BROAD OVERVIEW, AND IT'S A WHO WHAT WHERE WHAT WHEN WHY, AND THE REASON I'VE DONE THAT IS TO BASICALLY WHEN SOMEONE ASKS YOU IF YOU'RE A FIDUCIARY, THERE'S SOME QUESTIONS YOU SHOULD ASK.
THERE'S QUESTIONS YOU SHOULD ASK WHEN SOMEONE SAYS YOU'RE A FIDUCIARY AND I DIVIDE THESE QUESTIONS UP INTO THESE FOUR BROAD AREAS. SO THE FIRST BEING WHO IS A FIDUCIARY, DOES THIS EVEN APPLY TO YOU? SECOND, WHERE CAN I FIND THE FIDUCIARY ROLES? THIRD, WHAT ARE THE FIDUCIARY ROLES? THE DUTIES AND RESPONSIBILITIES THAT APPLY, AND FOURTH WHEN DO THESE STANDARDS APPLY? SO THEY DON'T ALWAYS APPLY. THEY DON'T APPLY TO EVERYTHING YOU MIGHT DO.
RIGHT. SO THAT'S ALSO THAT'S PROBABLY THE MOST IMPORTANT.
OKAY. SO LET'S MOVE FORWARD, AND SO FIRST WHO WHO IS A FIDUCIARY, AND SURPRISINGLY THE FIRST PLACE TO LOOK IS THE CALIFORNIA CONSTITUTION.
YOU KNOW, WHEN I STARTED DOING GOVERNMENTAL PLAN WORK IN CALIFORNIA, THAT SURPRISED ME THAT THERE WAS ACTUALLY A RETIREMENT PLAN, FIDUCIARY ROLES IN THE CONSTITUTION, BUT BUT THERE ARE AND SPECIFICALLY IN ARTICLE 16, SECTION 17, WHICH DEFINES THE RELATIONSHIP
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OF A RETIREMENT BOARD AND THE MEMBERS OF A RETIREMENT SYSTEM, AND SUBSECTION H OF THAT SECTION DEFINES RETIREMENT BOARD VERY BROADLY.SO IT COULD BE ANY BOARD OF ADMINISTRATION, TRUSTEES, DIRECTORS OR OTHER OTHER GOVERNING BODY OF A PUBLIC EMPLOYEES PENSION OR RETIREMENT SYSTEM, AND I SAY PENSION OR RETIREMENT SYSTEM BECAUSE IT ALSO APPLIES NOT JUST TO PENSION.
PLAN DOCUMENTS ALSO DESIGNATE FIDUCIARIES, AND THAT'S WHERE WE LOOK TO YOUR PLAN DOCUMENTS.
FOR EXAMPLE, THE DISTRICT'S 457 PLAN PROVIDES THAT THE EMPLOYER HAS DISCRETIONARY AUTHORITY TO MAKE ALL DECISIONS REQUIRED IN ADMINISTERING THE PLAN, AND YOUR INVESTMENT POLICY STATEMENT, WHICH RECENTLY WE WORKED ON WITH EMPOWER NAMES THE BOARD AS THE FIDUCIARY RESPONSIBLE FOR ADMINISTERING THE 457 B PLAN AND INVESTING ITS ASSETS.
IT'S ALSO IMPORTANT TO NOTE THAT THE CONSTITUTION DESCRIBES THE DUTIES OF THOSE WHO GOVERN THE RETIREMENT SYSTEM, AND SO IT'S NOT JUST A TITLE, IT'S ALSO WHAT YOU ACTUALLY DO.
FUNCTION IS MORE IMPORTANT THAN TITLE.
SO LET'S SEE IF YOU'RE REALLY A FIDUCIARY.
ONE OF THE ERISA PROVISIONS, THE FIRST ERISA PROVISIONS DEFINED FIDUCIARY BASED ON GENERAL COMMON LAW TRUST PRINCIPLES, AND THOSE ARE THE ELEMENTS OF IT, ARE, FIRST, ANYONE WHO EXERCISES ANY DISCRETIONARY AUTHORITY OR CONTROL OVER THE MANAGEMENT OF THE PLAN.
EMPHASIS ON DISCRETIONARY DECISION MAKING AUTHORITY.
SECOND, YOU'LL NOTICE THAT YOU DON'T EVEN NEED TO HAVE DISCRETION TO BE A FIDUCIARY IF YOU HANDLE PLAN ASSETS OR MANAGE PLAN ASSETS. THIRD, ANYONE WHO HAS DISCRETIONARY AUTHORITY OVER IN ADMINISTERING THE PLAN, AND FINALLY, YOU CAN BE A FIDUCIARY IF YOU GIVE INVESTMENT ADVICE FOR WHICH YOU'RE PAID.
SO AGAIN, I WANT TO EMPHASIZE THIS TEST IS BASED ON WHETHER YOU'RE ACTUALLY GOVERNING.
YOU'RE ACTUALLY PERFORMING ANY OF THESE FOUR FUNCTIONS.
IF YOU'RE ACTUALLY FUNCTIONING AS A FIDUCIARY, THAT'S WHAT THE COURTS LOOK AT.
SO WHY ARE WE TALKING ABOUT ERISA? SOME OF YOU ARE LIKE, WELL, ERISA DOESN'T APPLY TO PUBLIC SECTOR PLANS, SO WHY ARE YOU TALKING ABOUT ERISA? WELL, THERE'S NOT A LOT OF GUIDANCE UNDER STATE LAW ON SOME OF THESE THINGS, WHEREAS THERE'S A HUGE AMOUNT OF GUIDANCE UNDER FEDERAL LAW UNDER ERISA, AND THE STANDARDS ARE SUBSTANTIALLY SIMILAR.
SO, YOU KNOW, YOU'RE REALLY LOOKING TO GUIDANCE UNDER FEDERAL LAW TO HELP YOU INTERPRET IN SOME CASES WHERE THERE'S AN ABSENCE OF GUNS.
AND THIS IS WHAT THE COURTS DO AS WELL; THEY SOMETIMES LOOK TO ERISA WHEN THERE'S AN ABSENCE OF GUIDANCE UNDER STATE LAW, AND AS WELL ERISA PROVIDES SOME REALLY GOOD BEST PRACTICES.
ERISA'S LIKE THE DEPARTMENT OF LABOR GUIDANCE ABOUT IN SOME AREAS.
SO THE TYPES OF FUNCTIONS THAT INDICATE FIDUCIARY STATUS INCLUDE APPOINTING OTHER FIDUCIARIES SELECTING AND MONITORING INVESTMENTS OR SERVICE PROVIDERS, INTERPRETING PLAN PROVISIONS, AND DECIDING BENEFIT CLAIMS AND APPEALS.
PLANS MAY PERMIT THE PLAN ADMINISTRATOR OR OTHER FIDUCIARIES TO DELEGATE RESPONSIBILITIES.
THAT'S PRETTY TYPICAL TO OTHERS, BUT IT'S IMPORTANT TO REMEMBER THAT ACT OF DELEGATION IS ITSELF A FIDUCIARY ACT, AND THE PLAN OR THE IPS MAY ALSO PERMIT A FIDUCIARY TO DELEGATE CERTAIN DUTIES TO THIRD PARTIES AND THEN INCLUDING INVESTMENT ADVISORS AND INVESTMENT MANAGERS.
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DECIDING YOURSELVES, DECIDING CLAIMS AND APPEALS, OR YOU HAVEN'T BEEN ASKED TO INTERPRET THE PLAN PROVISIONS AND SAY IF THERE'S AN AMBIGUOUS PLAN PROVISION.SO WHO'S DOING THESE OTHER THINGS? IT'S A REALLY IMPORTANT QUESTION TO ASK.
WHY? BECAUSE UNDER THE COMMON LAW DUTY OF TRUST AND ERISA AS WELL, A FIDUCIARY HAS A DUTY OF REASONABLE CARE TO PREVENT A CO-FIDUCIARY FROM BREACHING THEIR FIDUCIARY DUTY, AND BREACHES HIS OR HER OWN FIDUCIARY DUTY BY PERMITTING A CO-FIDUCIARY BREACH, AND HAS TO TAKE REASONABLE ACTIONS TO GET THE CO FIDUCIARY TO CURE THE BREACH IF THERE IS ONE.
SO NEXT, WHERE DO YOU LOOK TO FIND THE FIDUCIARY RULES? WELL, WE'VE ALREADY TALKED ABOUT ARTICLE, ARTICLE 16, SECTION 17 OF THE CONSTITUTION.
SO THAT'S A GOOD PLACE TO START, AND IN ADDITION, THE GOVERNMENT CODE PROVIDES THAT LOCAL AGENCY DEFERRED COMPENSATION PLANS ARE RETIREMENT SYSTEMS FOR PURPOSES OF THAT CONSTITUTIONAL PROVISION, AND IT'S ALSO WORTH NOTING HERE THAT GOVERNMENT CODE PROVIDES ALSO PROVIDES THAT LOCAL AGENCY PENSION PLANS.
OUR RETIREMENT SYSTEMS UNDER THE CONSTITUTION, AND SO SOMETIMES PEOPLE THINK OF CALPERS, CALSTRS AS, YOU KNOW, OR COUNTY RETIREMENT SYSTEMS AS THE ONLY RETIREMENT SYSTEMS, AND ALTHOUGH NEW HIRES PARTICIPATE IN CALPERS, THE DISTRICT ALSO MAINTAINS TWO PENSION PLANS LOCAL AGENTS, LOCAL PENSION PLANS, THEIR LEGACY PLANS THAT FOR GENERAL EMPLOYEES AND FOR SWORN SAFETY EMPLOYEES THAT IT ESTABLISHED BEFORE JOINING CALPERS.
BOTH PROVIDE THAT THE EMPLOYER IS THE PLAN ADMINISTRATOR UNLESS IT APPOINTS SOMEONE ELSE, AND THAT'S TYPICAL LANGUAGE IN RETIREMENT PLAN DOCUMENTS IS TO PROVIDE AGAIN, IT'S THE DEFAULT IS THE EMPLOYER, BUT THE EMPLOYER CAN DELEGATE SOMEONE ELSE TO PERFORM THESE FIDUCIARY FUNCTIONS. SO ARTICLE 16, SECTION 17 PROVIDES THAT THE GOVERNING BODY OF A LOCAL AGENCY, DEFERRED COMPENSATION PLAN HAS PLENARY AUTHORITY AND FIDUCIARY RESPONSIBILITY FOR THE ADMINISTRATION OF THE PLAN AND THE INVESTMENT OF ITS ASSETS.
PLENARY, AGAIN, IT'S THE ONLY KIND OF WORD.
YOU'RE THE ONLY PLACE YOU'RE GOING TO FIND A WORD LIKE THAT IN A STATUTE.
PLENARY MEANS LEGAL AUTHORITY, BUT STILL SUBJECT TO REVIEW BY THE COURTS.
SO NEXT WE'RE GOING TO TALK ABOUT THE WHAT YOU'RE SUPPOSED TO DO IF YOU'RE A FIDUCIARY.
NUMBER ONE IS TAKE CARE OF PLAN ASSETS.
ADMINISTER THE PLANS TO EFFECTIVELY AND EFFICIENTLY SO THAT THEY CAN PAY BENEFITS AND PROVIDE OTHER SERVICES TO PARTICIPANTS AND BENEFICIARIES, AND MOST IMPORTANTLY, PERHAPS HOLD PLAN ASSETS FOR THE EXCLUSIVE PURPOSE OF PROVIDING BENEFITS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES AND DEFRAYING REASONABLE COSTS AND EXPENSES OF ADMINISTERING THE PLAN.
SO WITHIN THIS FRAMEWORK THERE'S BASICALLY A FIDUCIARY HAS THREE DUTIES.
THE FIRST AND MOST IMPORTANT IS THE DUTY OF LOYALTY.
NEXT THE DUTY OF PRUDENCE AND THE DUTY OF DIVERSIFICATION.
SO THE DUTY OF LOYALTY MEANS THAT THE BOARD HAS TO DISCHARGE ITS DUTIES SOLELY IN THE INTEREST OF, AND FOR THE EXCLUSIVE PURPOSES OF PROVIDING BENEFITS TO PARTICIPANTS AND BENEFICIARIES, MINIMIZING EMPLOYER CONTRIBUTIONS, AND DEFRAYING REASONABLE EXPENSES OF PLAN ADMINISTRATION, AND LIKE I SAID, THE REASON I PUT THIS FIRST IS BECAUSE THE BOARD'S DUTY TO PARTICIPANTS IS THE MOST IMPORTANT. IT TAKES PRECEDENCE OVER ALL OTHER DUTIES.
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IT ALSO MEANS THAT YOU HAVE TO AVOID CONFLICTS OF INTEREST, MISREPRESENTATIONS TO MEMBERS, AND MISUSE OF PLAN ASSETS.SO NEXT WE'LL TALK ABOUT THE DUTY OF PRUDENCE.
THAT'S WHY THIS STANDARD, IT'S SOMETIMES CALLED.
YES? YEAH, BEFORE WE GET TOO FAR INTO THIS.
SORRY. I DID HAVE A QUESTION ON THE RESPONSIBILITIES, BECAUSE I WANT TO UNDERSTAND YOU KNOW, WHEN WE'RE DELEGATING THOSE SPECIFIC RESPONSIBILITIES, ARE WE STILL DO WE STILL OWN THOSE RESPONSIBILITIES, OR DO WE OWN THE CARE IN IN DELEGATING IT TO THE RIGHT PEOPLE? REALLY GOOD QUESTION, AND WE'LL TALK ABOUT THAT MORE TOO, BUT IT'S A REALLY GOOD QUESTION AND DEFINITELY HAPPY TO ANSWER THAT RIGHT NOW BECAUSE IT'S SO IMPORTANT.
WHEN YOU PICK A PERSON TO DELEGATE, YOU KNOW, FIRST, WHAT ARE YOU DELEGATING? AND YOU KNOW, WHO ARE YOU DELEGATING IT TO? YOU WANT TO MAKE SURE THAT DELEGATION IS TO THE RIGHT PERSON, AND YOU WANT TO MAKE SURE THAT PERSON IS QUALIFIED, RIGHT, TO DO WHATEVER YOU'RE DELEGATING TO THEM.
SO THE ANSWER TO THE FIRST PART OF YOUR QUESTION IS YES, YOU HAVE TO EXERCISE YOUR FIDUCIARY DUTY OF PRUDENCE WHEN WHEN YOU DELEGATE, BUT THEN YOU ALSO HAVE A DUTY TO MONITOR AND IT DOESN'T AND DELEGATION DOESN'T.
SO IT DOESN'T RELIEVE YOU COMPLETELY OF LIABILITY.
IT JUST MEANS THAT, YOU KNOW, YOU'VE DELEGATED SOMEONE ELSE.
YOU STILL HAVE A DUTY TO MONITOR TO MAKE SURE THAT PERSON IS DOING THEIR JOB WELL, RIGHT.
WHATEVER YOU DELEGATED TO THEM.
SO IMPORTANT TO NOTE THAT THE BOARD CAN AND SHOULD RELY ON EXPERTS.
THAT'S TYPICALLY PEOPLE YOU KNOW IN YOUR YOUR INVESTMENT POLICY STATEMENT CONTEMPLATES THAT YOU'RE GOING TO HAVE AN INVESTMENT ADVISOR, YOU KNOW, SOMEBODY WHO'S AN EXPERT TO HELP YOU MAKE THESE KINDS OF DECISIONS AND TO HELP YOU MONITOR THE INVESTMENTS AND GIVE YOU INFORMATION AND THINGS LIKE THAT, AND WHILE THAT DOESN'T RELIEVE YOU OF ULTIMATE RESPONSIBILITY, AS WE'VE JUST TALKED ABOUT THAT CAN HELP YOU BETTER FULFILL YOUR FIDUCIARY DUTIES, RIGHT? WE'RE NOT, WE CAN'T ALL BE EXPERTS IN EVERYTHING, BUT WHAT'S MOST IMPORTANT IN THE DECISION MAKING PROCESS FOLLOWING IS, IS HAVING A DECISION MAKING PROCESS, FOLLOWING THAT PROCESS AND DOCUMENTING THE RESULTS.
THAT'S REALLY WHAT THE COURTS LOOK AT.
IT'S NOT THE RESULT, IT'S REALLY AT THE PROCESS, AND.
SO THE OUTCOME OF THE DECISION ISN'T AS IMPORTANT.
ISN'T AS IMPORTANT AS THE YOU KNOW, THE PROCESS ITSELF, AND THAT'S WHY THINGS LIKE POLICIES, STAFF REPORTS REPORTS FROM THE PLAN'S INVESTMENT CONSULTANT, THINGS OF THAT TYPE ARE MINUTES KEEPING YOUR BOARD SO YOU KEEP MINUTES.
RIGHT. WELL, THAT'S REALLY IMPORTANT TO DOCUMENT THE PROCESS.
YOU KNOW, YOUR REVIEW OF THE INVESTMENTS WITH THE INVESTMENT ADVISOR.
SO THE DUTY TO DIVERSIFY IS PROBABLY ONE OF THE MOST STRAIGHTFORWARD.
DIVERSIFYING INVESTMENTS I MEAN HERE THESE PLANS ARE PARTICIPANT DIRECTED.
SO YOU'RE REALLY LOOKING AT DIVERSIFYING INVESTMENT OPTIONS.
YOU'RE SELECTING AND INVESTMENT OPTIONS FOR PARTICIPANTS TO CHOOSE FROM, BUT IT'S EQUALLY IMPORTANT TO HAVE DIVERSIFICATION AMONGST THE FUNDS MADE AVAILABLE TO PARTICIPANTS TO CHOOSE FROM, AND YOU HAVE AN INVESTMENT ADVISOR TO HELP YOU IN PERFORMING THIS DUTY, AND THIS IS ONE OF THE PRIMARY GOALS IN SELECTING INVESTMENT OPTIONS IS TO ENABLE PARTICIPANTS BY ELECTING FROM AMONG THOSE OPTIONS, TO SELECT A DIVERSIFIED PORTFOLIO FOR THEIR
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ACCOUNT. THAT'S APPROPRIATE IN TERMS OF RISK AND RETURN.IN ADDITION, ERISA AND COMMON LAW OF TRUSTS ADD ANOTHER DUTY, AND THAT'S TO OPERATE THE PLAN IN ACCORDANCE WITH THE PLAN DOCUMENTS, INCLUDING THE INVESTMENT POLICY STATEMENT, AND THIS IS ALSO A TAX QUALIFICATION REQUIREMENT FOR THE 408 PLAN AND UNDER COMMON LAW TRUSTS.
IT'S REALLY A DUTY UNDER THE 457 PLAN AS WELL, TO OPERATE THE PLAN IN ACCORDANCE WITH ITS TERMS. SO IN SUM, THE WHAT IS THAT? THE BOARD MUST ACT SOLELY IN THE INTEREST OF PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
ACT PRUDENTLY WITH THE SAME CARE, SKILL AND PRUDENCE THAT A PRUDENT EXPERT WOULD DIVERSIFY PLAN ASSETS UNLESS CLEARLY IMPRUDENT.
FOLLOW THE PLAN'S TERMS UNLESS INCONSISTENT WITH THE LAW, AND FOCUS ON THE PROCESS AND DOCUMENTING, NOT THE RESULTS.
SO NEXT I'M GOING TO TALK ABOUT WHEN DID THE FIDUCIARY STANDARDS APPLY.
SO THE FIDUCIARY STANDARDS ONLY APPLY WHEN YOU'RE PERFORMING FIDUCIARY FUNCTIONS, NOT SURPRISINGLY, INCLUDING, AS WE'VE TALKED ABOUT, SELECTING AND MONITORING INVESTMENTS AND SERVICE PROVIDERS, INTERPRETING AMBIGUOUS PLAN PROVISIONS, DECIDING BENEFIT CLAIMS AND APPEALS, AND ALSO DELEGATION AND THE FIDUCIARY STANDARDS, IT'S IMPORTANT TO NOTE, DO NOT APPLY TO WHAT'S KNOWN AS MINISTERIAL, PURELY MINISTERIAL FUNCTIONS THAT IS NOT INVOLVING ANY DISCRETIONARY AUTHORITY TO ADMINISTER THE PLAN OR ITS ASSETS.
SO, FOR EXAMPLE, COLLECTING AND ALLOCATING CONTRIBUTIONS, APPLYING ELIGIBILITY RULES PROCESSING CLAIMS PREPARING PARTICIPANT COMMUNICATIONS, THINGS OF THAT NATURE.
ONE WITH NO DISCRETIONARY AUTHORITY THAT WORKS WITHIN A FRAMEWORK THAT'S ESTABLISHED BY OTHERS IS GENERALLY NOT A FIDUCIARY, BUT FIDUCIARIES CAN RELY ON INFORMATION PROVIDED BY PERSONS WHO PERFORM MINISTERIAL FUNCTIONS IF YOU'VE PRUDENTLY SELECTED THEM. SO NOW WE GET TO THE WHY, WHICH IS REALLY THE MOST IMPORTANT.
YOU'RE LIKE, OH MY GOD, HOW LONG IS THIS GOING TO GO ON? [CHUCKLING] I'M EMPATHETIC.
COMPLYING WITH THE FIDUCIARY STANDARDS AVOIDS SOME REALLY POTENTIALLY BAD THINGS.
THE FIRST IS PARTICIPANT LITIGATION.
YOU KNOW, THESE KIND OF CLAIMS CAN BE EXPENSIVE, BECAUSE THE DAMAGES THAT ARE CLAIMED ARE USUALLY THE LOSS RESULTING FROM THE BREACH.
THEN AND ALSO THE NUMBER OF LAWSUITS IN LIKE OVER THE PAST DECADE INVOLVING INVESTMENT OPTIONS AND PARTICIPANT FEES HAS JUST EXPLODED AND CONTINUES TO GROW AND STATE LAW MAY ACTUALLY AFFORD MORE FLEXIBILITY IN OBTAINING DAMAGES THAN, SAY, ERISA, BECAUSE ERISA DOESN'T ALLOW FOR PUNITIVE DAMAGES OR, YOU KNOW, EMOTIONAL PAIN AND SUFFERING, WHEREAS THOSE TYPES OF DAMAGES MIGHT BE AVAILABLE UNDER STATE LAW. IT'S ALSO A NEGATIVE PUBLIC AND EMPLOYEE RELATIONS NIGHTMARE, RIGHT, TO GET SUED FOR BREACH OF FIDUCIARY DUTY. THAT WOULD BE NOT GOOD, EVEN IF UNSUCCESSFUL, BAD PRESS WOULD BE, AND LOSS OF PARTICIPANT TRUST COULD BE SIGNIFICANT, AND ALSO COMPLYING WITH THESE STANDARDS INCREASES THE ABILITY TO DEMONSTRATE COMPLIANCE.
OBVIOUSLY, IN THE EVENT OF A LAWSUIT OR AN EVENT OF, YOU KNOW, AN IRS AUDIT OF INTERNAL CONTROLS OR SOMETHING LIKE THAT, AND IT HELPS ENSURE BEST PRACTICES.
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INVESTMENT POLICY STATEMENT.SO UNDER THE CONSTITUTION AND THE INVESTMENT POLICY STATEMENT, THE BOARD HAS THE SOLE EXCLUSIVE RESPONSIBILITY OVER PLAN ASSETS, AND THOSE STANDARDS APPLY TO THE BOARD'S, YOU KNOW, DEVELOPMENT AND MAINTAINING OF THE IPS SELECTION AND MONITORING OF THE PLAN'S INVESTMENT OPTIONS. SELECTING THE PLAN'S DEFAULT INVESTMENT OPTION.
I'LL EXPLAIN WHAT THAT IS IF YOU DON'T ALREADY KNOW.
SO THE BOARD'S PRIMARY GOAL IN SELECTING AND MONITORING THE PLAN'S INVESTMENT OPTIONS, AND I'LL BE REPETITIVE AND I'LL SAY THIS OVER AND OVER AGAIN, PROBABLY, BUT IT'S IMPORTANT.
ACTIVELY OVERSEEING THE PLAN'S INVESTMENT OPTIONS IS THE MOST IMPORTANT.
YOU KNOW, TO PERIODICALLY REVIEW AND ALLOWS YOU TO AMEND IT.
BECAUSE THINGS CHANGE, CIRCUMSTANCES CHANGE, MARKETS CHANGE DEMOGRAPHICS CHANGE, AND DOCUMENT YOUR REVIEW AND YOUR DECISION MAKING PROCESS IN PERFORMING ALL THESE FUNCTIONS, AND BEST PRACTICES FOR SELECTING INVESTMENT OPTIONS INCLUDE THOSE LISTED HERE YOU KNOW, PERFORMANCE, EXPERIENCE, SIZE OF THE INVESTMENT MANAGER INVESTMENT STYLE AND STRATEGY BECAUSE YOU'RE LOOKING FOR INVESTMENTS THAT FIT A PARTICULAR NICHE IN YOUR ASSET ALLOCATION.
ALSO, FEES ARE SUPER IMPORTANT.
AS YOU CAN SEE FROM ALL THE LAWSUITS THEY MUST BE REASONABLE, AND.
ALWAYS ASK ABOUT WHETHER THERE HAS BEEN ANY ENFORCEMENT ACTION OR LITIGATION AGAINST THE INVESTMENT MANAGER AND WHETHER THEY HAVE INSURANCE, THINGS LIKE THAT. OKAY, AND I'M NOT GOING TO GO THROUGH ALL OF THESE, BUT I JUST WANTED TO POINT OUT THAT IN THE IPS THERE ARE BOTH QUALITATIVE AND QUANTITATIVE FACTORS FOR YOU TO CONSIDER WHEN YOU'RE SELECTING AND MONITORING INVESTMENT OPTIONS.
ONE OF THE THINGS I WANTED TO POINT OUT IS THAT PARTICIPANT INVESTMENT KNOWLEDGE IS IMPORTANT, AND WHY IS THAT IMPORTANT? WELL, SOME OF THESE FIDUCIARY BREACH CASES HAVE INVOLVED PLANS THAT HAD PARTICULARLY I THINK IT'S IN THE UNIVERSITY SECTOR 403B PLANS.
THERE HAVE BEEN SOME CASES INVOLVING PLANS THAT HAD OVERLY COMPLICATED INVESTMENT LINEUPS WITH, YOU KNOW, WAY TOO MANY OPTIONS WITH DUPLICATIVE AND SOME OVERLY COSTLY AND UNDERPERFORMING FUNDS.
SO THAT'S SOMETHING TO CONSIDER AS WELL.
NOW LET'S TALK ABOUT DEFAULT INVESTMENT OPTIONS AGAIN.
THIS IS I DO THIS STUFF ALL THE TIME SO I KNOW WHAT A DEFAULT INVEST, BUT NOT EVERYBODY KNOWS WHAT A DEFAULT INVESTMENT OPTIONS, BUT YOU MAY BEING A PLAN PARTICIPANT. SO I BELIEVE YOUR PLAN, YOUR 457 PLAN HAS AUTOMATIC ENROLLMENT, IF I REMEMBER CORRECTLY.
SO THE QUESTION IS, WHAT HAPPENS WHEN A PARTICIPANT DOESN'T MAKE AN INVESTMENT ELECTION? YOU KNOW, WHERE DO YOU INVEST? WHERE DOES THEIR MONEY GET INVESTED? AND THAT'S WHERE THE DEFAULT INVESTMENT OPTION COMES IN, BECAUSE THAT'S ONE OF THE FIDUCIARY DECISIONS TO MAKE IS WHAT IS THE BEST TYPE OF INVESTMENT FOR THAT PURPOSE, AND FORTUNATELY THE DEPARTMENT OF LABOR, AGAIN, BY ANALOGY OR ERISA, HAS PROVIDED GUIDANCE ON QUALIFIED DEFAULT INVESTMENT ALTERNATIVES, AND THEY PROVIDED THOSE GUIDELINES OVER TEN YEARS AGO, AND THEY HELP.
THEY HELP YOU PROVIDE SOME STRUCTURE OR FRAMEWORK FOR PICKING A QUALIFIED DEFAULT INVESTMENT
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ALTERNATIVE. IT'S VERY COMMON TO USE TARGET DATE FUNDS FOR THIS PURPOSE, BECAUSE THEY START OUT WHEN PEOPLE ARE YOUNGER AND MORE AGGRESSIVE, LIKE MORE EQUITY INVESTMENTS, AND THEN AS PEOPLE NEAR RETIREMENT, THEY TRANSITION TO LESS RISKY INVESTMENTS AUTOMATICALLY, AND, YOU KNOW, THEIR AGE BASED ON A PARTICIPANT'S AGE.SO THEY'RE VERY POPULAR AS QDIA BUT THAT'S NOT THE ONLY PRODUCT, YOU KNOW, OUT THERE THAT COULD BE USED.
THE OTHER THING I THINK, WHICH FREQUENTLY PEOPLE DON'T KNOW ABOUT, IS THAT THE GOVERNMENT CODE ACTUALLY PROVIDES RELIEF FOR FIDUCIARIES IN THE CASE OF LIABILITY FOR PARTICIPANT DIRECT INVESTMENT DECISIONS, BUT OF COURSE, THERE'S SOME STRINGS ATTACHED, AND THOSE STRINGS ARE THAT TO QUALIFY FOR THAT RELIEF, YOU HAVE TO COMPLY WITH STANDARDS SIMILAR TO THOSE UNDER ERISA SECTION 404C.
SO WHAT DOES THAT MEAN? IT BASICALLY MEANS THAT YOU HAVE TO COMPLY WITH THE RULES UNDER ERISA SECTION 404C, AND THOSE REQUIRE THAT PARTICIPANT THAT YOU HAVE TO GIVE PARTICIPANTS AN EFFECTIVE OPPORTUNITY TO EXERCISE CONTROL OVER THE ASSETS AND THEIR ACCOUNT, AND THEY ACTUALLY EXERCISE THAT CONTROL, AND YOU HAVE TO PERMIT THEM TO CHOOSE FROM A BROAD RANGE OF INVESTMENT OPTIONS, AT LEAST THREE OF WHICH ARE DIVERSIFIED AND HAVE MATERIALLY DIFFERENT RISK AND RETURN CHARACTERISTICS.
SO AGAIN, WE'RE SORT OF BACK TO DIVERSIFICATION.
AGAIN, A COMMON THEME THROUGHOUT THIS.
YOU ALSO HAVE TO ALLOW INVESTMENT CHANGES AT LEAST QUARTERLY.
THAT'S NOT GOING TO PROBABLY NOT GOING TO BE AN ISSUE BECAUSE YOUR PLANS ARE, YOU KNOW, DAILY VALUED PLANS AND PROVIDE ENOUGH INFORMATION ABOUT THE INVESTMENT OPTIONS TO ALLOW PARTICIPANTS TO MAKE INFORMED DECISIONS AND EMPOWER CAN HELP WITH SOME OF THAT, AND WE RECENTLY WORKED ON THE CONTRACT EMPOWER CONTRACT AND I TRIED TO GET THEM TO, I ALWAYS TRY TO GET THE RECORD KEEPER'S TO AGREE TO THAT THEY'LL COMPLY WITH 404C AND THEY NEVER WANT TO DO THAT.
THEY'LL SAY, I ALWAYS SAY 404 C DOESN'T APPLY TO US.
IT DOESN'T APPLY TO GOVERNMENTAL PLANS, BUT ANYWAY, YOU DO THE BEST YOU CAN, BUT ANYWAY, THEY HAVE THEY HAVE, YOU KNOW, AGAIN YOU KNOW, THEY ISSUE PROSPECTUSES AND THINGS LIKE THAT. SO, YOU KNOW, THAT'S IMPORTANT, AND IT'S ALSO SOMETHING YOU CAN WORK WITH THEM AND GET THEM TO HELP YOU WITH COMPLYING WITH THE 404 C RULES.
ALSO, I THINK YOUR PLANS HAVE A SELF-DIRECTED BROKERAGE ACCOUNT OPTION.
AGAIN, THIS ALLOWS PARTICIPANTS TO CHOOSE FROM A BROADER RANGE OF INVESTMENT ALTERNATIVES.
THEY'RE GENERALLY OUTSIDE THE SCOPE OF THE, YOU KNOW, THE INVESTMENT POLICY STATEMENT PROCESSES, BUT YOUR FIDUCIARY DUTIES ALSO APPLY TO SELECTING AND MONITORING THE SELF-DIRECTED BROKERAGE ACCOUNT PROVIDER.
SO YOU ALSO HAVE A DUTY TO MONITOR THE PLAN'S INVESTMENT OPTIONS.
YOU KNOW, HERE ARE SOME BEST PRACTICES.
NUMBER ONE, FOLLOW THE INVESTMENT POLICY STATEMENT.
PERIODICALLY REVIEW PERFORMANCE AGAINST BENCHMARKS.
I THINK THE IPS SAYS AT LEAST ANNUALLY.
LOOK FOR ANY CHANGES IN FUND MANAGEMENT STYLE OR STRATEGY, GLOBAL MARKETS, ETC.
THAT MIGHT AFFECT WHETHER AN OPTION CONTINUES TO BE APPROPRIATE FOR THE PARTICULAR NICHE YOU HAVE IT FOR, AND LAST BUT NOT LEAST, DOCUMENT, DOCUMENT DOCUMENT. AGAIN, I'M GOING TO BE SOUNDING LIKE A BROKEN RECORD.
LET'S SEE, YEAH, SO, YOU MAY WANT TO MEET TO MONITOR INVESTMENT OPTIONS MORE FREQUENTLY THAN ANNUALLY.
SOME PEOPLE DO IT SEMI-ANNUALLY.
SOME EVEN DO IT QUARTERLY, AND I THINK IT DEPENDS PARTLY ON CIRCUMSTANCES.
MAYBE YOU DON'T WANT TO WAIT A YEAR TO TAKE ANOTHER LOOK AT IT.
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ESTABLISHED IN THE IPS.OR SHOW SIGNS THAT IT MIGHT NOT IN THE FUTURE.
IT THEN TYPICALLY YOU WILL PUT IT ON A THAT FUND ON A WATCH LIST.
IN THAT CASE SHOULD HAVE THE INVESTMENT ADVISOR PERFORM SOME ADDITIONAL RESEARCH AND DUE DILIGENCE, AND THEN REPORT BACK, AND , YOU KNOW, REVIEW THAT INFORMATION AT A SUBSEQUENT MEETING AND DECIDE WHETHER TO KEEP THAT OPTION IN THE LINEUP OR REMOVE IT.
YOU PROBABLY REMOVE IT FROM THE WATCH LIST.
IF NOT, YOU PROBABLY WANT TO TERMINATE IT.
SO SELECTING AND MONITORING SERVICE PROVIDERS IS ALSO A FIDUCIARY FUNCTION, AND YOU'RE RESPONSIBLE EITHER DIRECTLY OR BY DELEGATION FOR PRUDENTLY SELECTING AND MONITORING ALL OF THE PLAN'S SERVICE PROVIDERS.
IT'S CRITICAL TO PERIODICALLY DO RFPS AND DOCUMENT THE PROCESS FOR, YOU KNOW, SELECTING SERVICE PROVIDERS, AND OF COURSE, YOU JUST WENT THROUGH THIS PROCESS WITH EMPOWER.
SO YOU HAVE A TPA, YOU JUST SELECTED THEM.
SO YOU MIGHT NOT BE DOING THIS FOR A WHILE, BUT YOU STILL HAVE THE DUTY TO MONITOR, BUT THIS IS SOMETHING TO KEEP IN MIND, AND HERE'S SOME THINGS TO THINK ABOUT.
NEXT, I WANT TO TALK VERY BRIEFLY ABOUT OPERATIONS AGAIN, RECORD KEEPING, UNFORESEEABLE EMERGENCY DISTRIBUTIONS, PARTICIPANT LOANS, PROCESSING, DOMESTIC RELATIONS ORDERS, CLAIMS AND APPEALS, PARTICIPANT COMMUNICATIONS, AND I DO WANT TO EMPHASIZE DATA SECURITY.
THAT'S REALLY IMPORTANT THESE DAYS.
SUPER IMPORTANT, BUT ALL THESE THINGS ARE PROBABLY NOT THINGS YOU'RE GOING TO BE DOING YOURSELVES, RIGHT. YOU'RE NOT DOING THE RECORD KEEPING, YOU'RE NOT REVIEWING QUADROS AND THINGS LIKE THAT, BUT, YOU KNOW, YOU'RE, YOU KNOW, DELEGATING THOSE TO OTHERS, FOR EXAMPLE, IN POWER, AND EMPOWER, LIKE MOST RECORD KEEPER'S LOATHE TO ADMIT OR ACKNOWLEDGE FIDUCIARY STATUS.
THEY, IN FACT, THEY DISCLAIM FIDUCIARY STATUS GENERALLY.
YOU KNOW, THEY WANT TO MAKE CLEAR THAT THEIR FUNCTION IS MINISTERIAL, BUT AND MOST OF MOST OF THESE THINGS, MOST OF THE THINGS LISTED HERE ARE MINISTERIAL IN NATURE MOST OF THE TIME, BUT THAT'S NOT ALWAYS TRUE.
THERE COULD BE SITUATIONS LIKE WITH A DOMESTIC RELATIONS ORDER, FOR EXAMPLE, FREQUENTLY ISSUES COME UP WITH DOMESTIC RELATIONS ORDERS AND EMPOWER, AND ACTUALLY IT'S QUADRO CONSULTANTS.
THEY'RE AN AFFILIATE THAT IS PROCESSES THE QUADROS THE DOMESTIC RELATIONS ORDERS, AND THEY HAVE A PROCEDURE, YOU KNOW, PROCEDURE, A QUADRO POLICY THAT THEY FOLLOW, BUT THERE MAY BE TIMES WHEN SOMETHING COMES UP THAT'S NOT COVERED BY THAT POLICY, AND THEY MAY NOT THEY WILL NOT WANT TO MAKE A DECISION ABOUT CERTAIN THINGS AND THEY WILL LOOK TO THE PLANNED FIDUCIARY TO TELL THEM WHAT TO DO.
SO THAT'S WHY I WANTED TO GIVE YOU THAT.
SO THAT MAY REQUIRE, YOU KNOW, SOME FIDUCIARY DECISION, AND EMPOWER NEITHER EMPOWER NOR QUADRO CONSULTANTS WILL WANT TO MAKE THAT DECISION MOST LIKELY.
THE OTHER REALITY IS THAT YOU CAN'T PERFORM EVERY FUNCTION.
IT'S IMPOSSIBLE TO OPERATE THE PLANTS.
YOU GUYS ARE IN THE BUSINESS OF RUNNING PARKS, WHICH IS.
SO YOU HAVE TO DELEGATE SOME OF THE RESPONSIBILITIES THAT YOU CAN'T PROPERLY PERFORM TO OTHERS, INCLUDING EMPOWER AND DISTRICT STAFF, BUT YOU HAVE TO, AGAIN, PRUDENTLY CHOOSE THOSE PEOPLE, AND YOU WANT TO PAY ATTENTION TO WHO'S PERFORMING THESE FUNCTIONS, AND THAT'S WHY PLANNED GOVERNANCE IS SO IMPORTANT.
WHO IS RESPONSIBLE FOR DOING WHAT?
[00:40:05]
AND AGAIN, IT'S IMPORTANT BECAUSE DELEGATION IS IS ITSELF A FIDUCIARY ACT.SO NOW LET'S TALK ABOUT SOME FIDUCIARY LITIGATION.
I'M NOT GOING TO DO A LOT OF CASES, BUT I WANTED TO HIGHLIGHT A COUPLE OF OF WHAT I THINK ARE SIGNIFICANT AND ILLUSTRATIVE CASES.
FIRST, WHAT IS WHAT ARE THE ELEMENTS OF A CLAIM FOR BREACH OF FIDUCIARY DUTY? FIRST, THE PLAINTIFF HAS TO ESTABLISH THAT THE DEFENDANT IS A FIDUCIARY, WHICH IS USUALLY A QUESTION OF LAW, BUT IT CAN ALSO BE FACTUAL, LIKE WHAT IS THE PERSON ACTUALLY DOING VERSUS THEIR TITLE, FOR EXAMPLE.
SO THE FIRST CASE I WANT TO TALK ABOUT, O'NEAL IS A VERY INTERESTING CASE.
IT IS ACTUALLY IT INVOLVES A DEFINED BENEFIT COUNTY RETIREMENT SYSTEM.
WE HAVE DEFINED CONTRIBUTION PLAN OR THAT'S WHAT WE'RE RESPONSIBLE FOR HERE THAT WE'RE TALKING ABOUT, AND THAT'S BECAUSE THE CASE IS VERY INSTRUCTIVE, AND THERE'S NOT A TON OF CASES OUT, BUT THIS CASE IS VERY INSTRUCTIVE ABOUT, YOU KNOW, HOW A CALIFORNIA COURT LOOKS AT THIS ISSUE, LOOKS AT FIDUCIARY THIS ALLEGED FIDUCIARY BREACH, AND THE FACTS ARE PROBABLY PRETTY FAMILIAR IN THE MIDST OF THE GREAT RECESSION.
THE STANISLAUS COUNTY EMPLOYEES RETIREMENT ASSOCIATION BOARD APPROVED THE TRANSFER OF FUNDS FROM A NON VALUATION RESERVE TO A VALUATION RESERVE, AND WHAT DOES THAT MEAN? THAT MEANS WELL, YOU COULD COUNT THEM IN THE VALUATION.
YOU KNOW, NORMALLY, THE RESERVE IS USED FOR NON-VESTED BENEFITS BUT THEY TRANSFERRED THESE FUNDS TO AGAIN TO A VALUATION RESERVE THAT THEY COULD COUNT IN VALUING THE PLAN'S ASSETS WHICH ALLOWED THEM TO BASICALLY NOT BANKRUPT THE COUNTY.
THE COUNTY SAID IF YOU DO THIS A LOT OF THE ACTIVE MEMBERS WON'T HAVE JOBS.
RIGHT, AND THIS IS A REAL YOU KNOW, THIS IS A SERIOUS THING.
IT'S A REAL THING, AND, YOU KNOW, IN CALIFORNIA, IT WAS DEFINITELY SO DURING THE GREAT RECESSION, AND THEY ALSO LENGTHENED THE AMORTIZATION PERIOD FOR THE SYSTEM'S UNFUNDED ACCRUED ACTUARIAL LIABILITY.
AGAIN, WAY TOO TECHNICAL BEYOND WHAT WE'RE CONCERNED WITH HERE, BUT IN 2009, SEVERAL RETIRED MEMBERS SUED THE SYSTEM, CLAIMING BY TAKING THESE ACTIONS, THE BOARD BREACHED ITS DUTIES OF LOYALTY AND PRUDENCE TO THE MEMBERS BY PUTTING THE COUNTY AND OTHER PARTICIPATING EMPLOYERS AHEAD OF ITS MEMBERS.
SO THE APPELLATE COURT FIRST RULED THAT NONE OF THE CHALLENGED ACTIONS WERE PER SE ILLEGAL, SO LONG AS THEY WERE MOTIVATED BY A DESIRE TO BENEFIT THE MEMBERS RATHER THAN A THIRD PARTY.
SO THAT IS THAT THE BOARD, PROPERLY CONSIDERED HOLISTICALLY, THAT ACTIVE MEMBERS WOULD HAVE LOST THEIR JOBS HAD THE COUNTY BEEN REQUIRED TO PAY THE OTHERWISE REQUIRED CONTRIBUTIONS.
SECOND, THE COURT CONCLUDED THAT DECISIONS MADE BY A PUBLIC RETIREMENT SYSTEM AREN'T ILLEGAL BECAUSE THEY DON'T EQUALLY BENEFIT ACTIVE MEMBERS AND RETIREES.
SO HERE THIS IS, TO SOME EXTENT, BENEFITING ACTIVE MEMBERS MORE THAN THE RETIREES BUT THESE WERE HARD DECISIONS TO MAKE, AND THE COURT RECOGNIZED THAT THESE THESE DECISIONS THAT THIS RECOGNIZED THAT THESE CIRCUMSTANCES THAT WERE THEN PREVAILING NECESSARILY INFORMED THE MANNER IN WHICH THE BOARD DISCHARGED ITS FIDUCIARY DUTIES, AND WHILE PUBLIC RETIREMENT BOARDS MUST GRAPPLE WITH THE CHALLENGES OF MAINTAINING AN ACTUARIALLY
[00:45:10]
SOUND RETIREMENT SYSTEM THE PARAMOUNT GOAL IS TO ENSURE THE SECURITY OF THE MEMBERS' BENEFITS, AND I THINK PROBABLY MOST RELEVANT HERE IS THAT.RETIREMENT BOARDS SHOULD BE ENSURE THAT THEY'RE BEING ADVISED BY COMPETENT PROFESSIONALS.
THAT WAS A BIG PART OF THIS CASE, AND HAVE IN PLACE PROCESSES FOR ENSURING THAT THE INTERESTS OF ALL RETIREMENT SYSTEM MEMBERS ARE WEIGHED AND THOUGHTFULLY CONSIDERED.
WHAT WOULD BE A METHOD OF DOING THAT? PARDON? WHAT WOULD IT BE A METHOD OF DOING THAT? HOW WOULD YOU ENSURE THAT? AGAIN, IT WOULD BE THE PROCESS THAT YOU USE TO MAKE THE DECISION.
SO FOR EXAMPLE, IN THIS CASE, IF YOU WERE THE BOARD, THE STANCERA BOARD RETIREMENT BOARD, AND YOU'RE TRYING TO DECIDE WHETHER TO TRANSFER THIS MONEY, LET'S SAY, YOU WOULD WANT TO LOOK AT AND DOCUMENT THAT YOU REVIEWED AND LOOKED AT AND CONSIDERED THE INTERESTS OF ALL THE MEMBERS, ACTIVE MEMBERS, RETIRED MEMBERS, ETC, AND IN MAKING THAT DECISION, THE DECISION THEY MADE.
THIS IS LIKE AN EXTRAORDINARY CIRCUMSTANCE, RIGHT, WHERE THIS DECISION COULD AFFECT ACTIVE MEMBERS JOBS, AND YOU'D WANT TO DOCUMENT THAT. YOU'D WANT TO DOCUMENT THE BASIS FOR CONCLUDING THAT'S THE CASE.
SO IT'S REALLY IT'S REALLY THE WAY YOU DO THAT IS BY EVALUATING ALL OF THE, THE IMPACT OF YOUR DECISION ON ALL OF THE MEMBERS ACTIVE, RETIRED AND THEN DOCUMENT THAT DOCUMENT THAT YOUR REVIEW OF HOW THIS IMPACTS ALL THESE PEOPLE AND HOW YOU WEIGHED THEM AND HOW BASED ON THAT, YOU ENDED UP DECIDING TO TRANSFER THOSE ASSETS IF THAT MAKES SENSE.
PRESIDENT ECHOLS, CAN I JUST ASK FOR ONE CLARIFICATION? SURE. SO IN THIS PARTICULAR CASE THAT YOU ARE USING TO ELUCIDATE THESE PRINCIPLES, THIS WAS A PENSION PLAN AND CORRECT.
CAN YOU JUST KIND OF EXPLAIN HOW-- YEAH, AND THAT'S WHAT THE YOU KNOW, THE ONLY I MEAN, THE REAL REASON TO INCLUDE THIS CASE HERE AGAIN, IS TO EMPHASIZE THE IMPORTANCE OF PROCESS.
RIGHT. IT'S YOU KNOW, AGAIN, WE'RE BACK.
I JUST KEEP HITTING THE SAME POINT BUT IT'S REALLY IMPORTANT, RIGHT, PROCESS AND DOCUMENTATION.
THAT'S WHAT THE RETIREMENT BOARD DID HERE, BUT LYNNE'S ABSOLUTELY CORRECT THAT YOU KNOW, THE ISSUES IN TERMS OF WEIGHING THE INTERESTS OF ACTIVE VERSUS RETIRED MEMBERS IS VERY DIFFERENT IN THE PENSION CONTEXT, BECAUSE ACTIVE MEMBERS ARE FUNDING EFFECTIVELY, THEY'RE THE ONES CONTRIBUTING TO THE PLAN NOW, TODAY TO FUND BENEFITS UNDER THE PLAN AND THAT INCLUDES THE RETIREES' BENEFITS.
SO IT'S VERY DIFFERENT, RIGHT.
IS THAT HELPFUL? I THINK WHAT YOU MIGHT MEAN TO SAY IS WE DON'T HAVE THAT ISSUE WITH A 457(B) PLAN.
CORRECT. BECAUSE EMPLOYEES ARE TIED TO OUR PARTICULAR PLAN.
THEY CAN'T GO OFF AND CHOOSE ANY OTHER, BUT FORMER EMPLOYEES AND RETIREES CAN ACTUALLY CHOOSE TO TAKE THEIR MONEY AND ROLL IT INTO ANY OTHER TYPE OF-- RIGHT, AND THEIR BENEFITS DON'T DEPEND ON OTHER ACTIVE EMPLOYEES CONTRIBUTING AND THINGS LIKE THAT.
YEAH, IT'S COMPLETELY DIFFERENT, RIGHT? IT'S A DEFINED, YOU KNOW, AND TO REALLY EXPLAIN THE DIFFERENCE, IT'S A 457 PLAN OR THE 401(A) PLAN IS A DEFINED CONTRIBUTION PLAN.
SO PEOPLE PUT MONEY, THEY CONTRIBUTE MONEY, YOU CONTRIBUTE MONEY, IT'S PUT INTO AN ACCOUNT, AND WHAT THE BENEFIT THAT THE PARTICIPANTS ULTIMATELY RECEIVE DEPENDS ON THE INVESTMENT PERFORMANCE OF THE FUNDS AND THINGS THEY SELECT TO INVEST THEIR ACCOUNT IN PENSION PLAN.
THE RISK IS ALL ON THE EMPLOYER AND SO YOU HAVE TO FUND THE PROMISED PENSION BENEFIT.
THEY'RE BASICALLY IT'S THE BENEFIT THAT'S GUARANTEED AS OPPOSED TO THE CONTRIBUTIONS.
[00:50:03]
SO IT CREATES A VERY DIFFERENT DYNAMICS WHEN YOU TALK ABOUT, YOU KNOW, WHO'S CONTRIBUTING, WHO, YOU KNOW, ACTIVES AND RETIREES, BECAUSE THEY MAY HAVE DIFFERENT INTERESTS AND THAT'S NOT GOING TO BE THE CASE WITH A DEFINED CONTRIBUTION PLAN.THEY CAN TAKE THEIR MONEY AND ROLL IT SOMEPLACE ELSE.
IT DOESN'T WHAT THEY HAVE DOESN'T DEPEND ON WHAT ACTIVE EMPLOYEES ARE DOING.
IT'S BECAUSE EVERYBODY HAS THEIR OWN SEPARATE ACCOUNT, HOPEFULLY.
DOES THAT HELP? BETTER? GOOD? OKAY.
YEAH. SO THIS IS A GOOD CONVERSATION.
SO IT'S IN ADDITION TO THE FOR CURRENT EMPLOYEES BACK TO WHEN WE OFFERED CALPERS.
IS THAT CORRECT? I JUST WANT MAKE SURE I HAVE IT ALL SORTED OUT.
YEAH, IT'S WHAT THEY CALL A DEFERRED COMP.
IT'S A IT'S A TRUE LIKE DEFERRED COMPENSATION PLAN.
SO IT'S KIND OF LIKE A 401 K PLAN.
RIGHT. PEOPLE DEFER FROM THEIR SALARY.
IN ADDITION, AND IT'S A BENEFIT.
YES, BUT WE HAVEN'T ALWAYS HAD CALPERS.
IS THAT CORRECT. SO WHAT-- RIGHT, EXACTLY, YOU DO HAVE TWO LEGACY PENSION PLANS AS WELL AND ONE FOR SWORN SAFETY AND ONE FOR GENERAL EMPLOYEES, AND WHEN YOU MADE THAT TRANSITION TO CALPERS AGAIN, I WASN'T AROUND THEN.
I MEAN, I WAS PROBABLY AROUND LIVING.
I WASN'T AROUND BUT BASICALLY, WHEN YOU DID THAT TRANSITION TO CALPERS WHAT HAPPENED, I BELIEVE, IS THAT CALPERS HAS RULES THAT ALLOW YOU TO CONTINUE TO MAINTAIN YOUR LOCAL RETIREMENT SYSTEM, AND THEN YOU GIVE PARTICIPANTS AN ELECTION AT THAT TIME, WHETHER THEY WANT TO REMAIN IN THE LOCAL RETIREMENT SYSTEM OR MOVE TO CALPERS AND DOES THAT MOVE TO CALPERS IS USUALLY A TRANSFER OF ASSETS AND LIABILITIES TO CALPERS FOR THOSE PEOPLE, BUT YOU STILL HAVE THOSE PLANS, AND THEY DO SAY THAT THE PLAN ADMINISTRATOR IS THE EMPLOYER, UNLESS THE PLAN OR THE EMPLOYER, PARDON ME, THE EMPLOYER IS THE PLAN ADMINISTRATOR, UNLESS THE EMPLOYER DESIGNATES SOMEONE ELSE.
SO YOU DO HAVE TWO PENSION PLANS.
I MEAN, OUR FOCUS HERE IS ON THE DEFINED HAS BEEN ON THE DEFINED CONTRIBUTION PLAN, BUT IT'S IMPORTANT TO REMEMBER THAT YOU ALSO HAVE THESE PENSION PLANS, AND THEY ALSO ARE YOU KNOW AGAIN THE YOU KNOW, PLAN ADMINISTRATOR IS SUBJECT TO THE SAME FIDUCIARY DUTIES, AND I GUESS I HAVE TWO MORE QUESTIONS.
THE OTHER QUESTION IS THE CALPERS TRANSITION.
YEAH, 1981 IS WHEN THE 457 PLAN WAS ESTABLISHED.
SO OUR ASSISTANT GENERAL MANAGER OF FINANCE AND MANAGEMENT SERVICES, DEBORAH SPAULDING, IS SAYING IT WAS 2001 WHEN THERE WAS A TRANSITION FROM TRANSAMERICA TO CALPERS FOR MOST OF THE MISCELLANEOUS EMPLOYEES.
OKAY, AND THEN WITH THE TWO, MY SECOND QUESTION, THE TWO LEGACY PENSION PLANS.
HOW ARE THOSE BEING MANAGED RIGHT NOW? WE CAN GET BACK TO YOU ON THAT.
THAT'S A LITTLE BIT LONGER CONVERSATION, BUT THEY YEAH.
I DON'T KNOW. SO IT'S NOT WITHIN THIS 457, WHICH IS THE DEFERRED.
NO, THIS IS A COMPLETELY SEPARATE.
OKAY. THAT'S WHAT I THOUGHT, BUT I JUST WANT TO CONFIRM.
INITIALLY THEY FOCUSED ON IT'S LIKE OVER THE PAST DECADE, JUST EVERY DAY YOU READ ABOUT ANOTHER, ANOTHER BIG, ANOTHER FIVE, TEN YOU KNOW, AND INITIALLY THESE SUITS FOCUSED ON LARGE ERISA COVERED, YOU KNOW, CORPORATE 401 K PLANS AND THINGS LIKE THAT, BUT THEY SINCE EXPANDED TO NONPROFITS INCLUDING, YOU KNOW, SECONDARY EDUCATION UNIVERSITIES, 403(B) PLANS, AND JUST RECENTLY, THIS IS WE LEARNED OF A PARTICIPANT FEE SUIT AGAINST A PUBLIC SECTOR DC PLAN SPONSOR.
[00:55:01]
THAT'S THE FIRST ONE THAT I'VE HEARD OF, BUT I SUSPECT THAT'S PROBABLY NOT THE LAST BECAUSE IT'S NOT AN AREA THAT, YOU KNOW, AGAIN, THESE SEEM SEEM TO BE LIKE MOVING ON TO NEW AREAS WITH THESE SUITS, AND FREQUENTLY THEY INVOLVE CLASS ACTIONS CLAIMING BREACH OF FIDUCIARY DUTY FOR SELECTING MORE EXPENSIVE FUND SHARE CLASSES WHEN LESS EXPENSIVE ONES ARE AVAILABLE, BUT THEY'VE ALSO EXTENDED TO CLAIMS, LIKE I SAID, AGAINST UNIVERSITY 403(B) PLAN FIDUCIARIES FOR OFFERING COMPLEX INVESTMENT LINEUPS WITH LOTS OF FUNDS AND SOME OF THEM COSTLY AND DUPLICATIVE AND POORLY PERFORMING OPTIONS AND THEY'VE ALSO SUED TPAS, CLAIMING THAT THEY WERE FUNCTIONAL FIDUCIARIES BY CONSULTING REGARDING THE FUNDS OFFERED UNDER THE PLANS.THERE'S ALSO BEEN SOME CASES ON REVENUE SHARING INVOLVING REVENUE SHARING AS WELL.
SO I WANTED TO TALK ABOUT THIS ONE, THIS SECOND CASE.
IT'LL BE THE LAST ONE, BUT AND IT'S NOT A SUPER RECENT CASE, THERE'S BEEN MORE RECENT CASES, BUT THE REASON I'M USING FOCUSING ON THIS TIBBLE VERSUS EDISON IS THAT IT IS PROBABLY ONE OF THE MOST OFTEN CITED CASES, AND IT'S THE SUPREME COURT ULTIMATELY WENT TO SUPREME COURT, AND UNDER THE FACTS IN THIS CASE, EDISON SPONSORED A 401 K PLAN WITH WHICH IS, LIKE I SAID, SIMILAR TO A 457 PLAN IN MANY WAYS, WITH A MENU OF INVESTMENT OPTIONS, INCLUDING MUTUAL FUNDS AND RELYING SOLELY ON THE ADVICE OF ITS INVESTMENT ADVISOR.
EDISON DECIDED TO INCLUDE THREE RETAIL CLASS FUNDS IN THE PLAN'S MENU IN '99 AND AGAIN IN 2002, AND ALL THREE OF THESE FUNDS WERE AVAILABLE TO THE PLAN IN MUCH CHEAPER INSTITUTIONAL CLASS SHARES.
WITH VIRTUALLY THE SAME FEATURES.
THE PLAN PARTICIPANTS SUED EDISON FOR BREACH OF FIDUCIARY DUTY, CHALLENGING ITS INVESTMENT SELECTIONS AS IMPRUDENT AND REVENUE SHARING, AS WELL AS VIOLATING THE PLAN DOCUMENT AND A CONFLICT OF INTEREST.
THEY ACTUALLY, I BELIEVE THEY HAD TWO PLANS, AND THEY WERE THEY WERE CHARGING FEES FOR AS ONE LUMP SUM FOR BOTH OF THE PLANS, BUT ONE PLAN WAS LARGER THAN THE OTHER.
ON APPEAL, LET'S SEE, YEAH, SO, ON APPEAL, THE NINTH CIRCUIT CONCLUDED THAT EDISON HAD BREACHED ITS FIDUCIARY DUTY OF PRUDENCE AND NOT MERELY BY INCLUDING THE RETAIL CLASS FUNDS, BUT ALSO BY NOT INVESTIGATING THE POSSIBILITY OF INSTITUTIONAL CLASS ALTERNATIVES, UNREASONABLY RELIED ON THEIR INVESTMENT ADVISOR'S RECOMMENDATION WITHOUT REVIEWING THE RELATIVE COST OF ALL AVAILABLE SHARE CLASSES AS AN EXPERIENCED INVESTOR WOULD.
AGAIN, IMPORTANT PROCESS TO EVALUATE THE INVESTMENT ADVISOR'S RECOMMENDATIONS, AND BASICALLY, IF IT COULDN'T PROVE IT, THAT MEANT MEANS THAT IT DIDN'T DOCUMENT ITS PROCESS, ITS DECISION MAKING PROCESS.
FINALLY, IT WASN'T RELIEVED OF ITS FIDUCIARY DUTIES UNDER ERISA 404(C) BECAUSE THE LOSSES WERE THE RESULT OF ITS ACTIONS, NOT THE PARTICIPANTS INVESTMENT CHOICES, AND THEN ON THE NEXT SLIDE, IT TALKS ABOUT THE ISSUE WITH THE STATUTE OF LIMITATIONS, WHICH, WHICH ON THE CLAIM INVOLVING THE RETAIL CLASS SHARES THAT WERE ADDED IN 1999 AND WHETHER THEY WERE TIME BARRED, AND UNLESS YOU'RE REALLY INTERESTED IN THAT, I'LL KEEP MOVING BUT I'M HAPPY TO TALK ABOUT I MEAN, IT'S INTERESTING.
LET'S SEE, BUT AGAIN, I THINK WHAT'S IMPORTANT HERE IS WHAT ARE THE LESSONS FROM THIS CASE? AND YOU KNOW, THERE'S AN ONGOING DUTY TO PRUDENTLY MONITOR.
I MEAN, THAT'S REALLY ONE OF THE BIG MESSAGES AND AGAIN, I'LL SAY IT AGAIN OVER AND OVER AGAIN.
PROCESS, PROCESS, PROCESS, DOCUMENT, DOCUMENT DOCUMENT.
SO SOME KEY TAKEAWAYS WITH THE FIDUCIARY LITIGATION.
[01:00:09]
BETTER PERFORMING LOWER COST ONES ARE AVAILABLE.YOU KNOW, EXCESSIVE FEES, FAILURE TO FOLLOW PLAN DOCUMENTS, POOR ADMINISTRATION.
FIDUCIARY INSURANCE, THAT'S ANOTHER THING THAT SOME SPONSORS ATTEMPT TO, YOU KNOW, MITIGATE PERSONAL LIABILITY RISK BY PURCHASING FIDUCIARY LIABILITY INSURANCE.
THERE'S AN EXAMPLE HERE OF A GOVERNMENT CODE SECTION THAT'S JUST REALLY BY WAY OF EXAMPLE, DOESN'T APPLY TO YOU, FOR, YOU KNOW, A CONTINUING LEGISLATIVE APPROPRIATION FOR FIDUCIARY LIABILITY INSURANCE FOR THE CALSTRS BOARD.
FINALLY, LET'S TALK ABOUT THE ANNUAL REVIEW PROCESS.
PART OF THAT PROCESS IS GENERALLY GOING TO INCLUDE PLAN DOCUMENT COMPLIANCE, AND I WANT TO BE SOMEWHAT CLEAR ABOUT THAT.
YOU KNOW, WHAT EMPOWER'S ROLE IS HERE.
EMPOWER IS IS CONTRACTED TO DO THE PLAN.
YOU KNOW, PROVIDE THE PLAN DOCUMENTS FOR THE 457 AND 401(A) PLAN.
WE'RE STILL IN THE PROCESS OF, I BELIEVE, MAPPING THOSE OVER AND RESTATING THE PLANS ONTO THAT, ONTO THEIR THEIR PLAN DOCUMENTS, AND THOSE PLAN DOCUMENTS ARE PRE-APPROVED.
PLAN DOCUMENTS, IRS PRE-APPROVED, WHICH MEANS THAT THE IRS IT'S BASICALLY A LIKE A STANDARDIZED DOCUMENT WITH BOILERPLATE LIKE LEGAL PROVISIONS, AND THEN IT HAS AN ADOPTION AGREEMENT WHERE YOU CAN SELECT THE OPTIONS YOU WANT.
VERY MUCH LIKE MISSION SQUARE HAS THE SAME TYPE OF ARRANGEMENT, AND EVERY SIX YEARS THE PROVIDER GOES BACK TO THE IRS AND HAS TO UPDATE THE PLAN AND GET THEIR APPROVAL AGAIN, AND THEN THE PLAN, ALL THE PEOPLE THAT ADOPT THEIR, ALL THE EMPLOYERS THAT ADOPT THEIR PLAN, HAVE TO ADOPT IT AGAIN.
SO IT'S NOT THE SAME AS IF YOU HAD AN INDIVIDUALLY DESIGNED PLAN, BUT IT'S JUST WORTH MENTIONING THAT THERE IS THIS PROCESS FOR MAKING SURE THAT YOUR PLANS ARE UPDATED AND STAY IN COMPLIANCE WITH THE LAW, AND ALSO, IF YOU MAKE ANY DISCRETIONARY CHANGES, YOU KNOW, YOU HAVE TO AMEND THE PLANS TO PROVIDE FOR THIS CHANGES.
BEST PRACTICES AGAIN, TO THE EXTENT THAT YOU CAN FAMILIARIZE YOURSELF WITH THE PLAN TERMS, DOCUMENT DECISIONS ABOUT PLAN INTERPRETATION WITH REGULATIONS, POLICIES AND PROCEDURES.
YOU KNOW, THERE'S PROCESSES, IRS CORRECTION PROCESS IF THERE ARE ERRORS, AND AGAIN, REVIEW AND UPDATE THE PLAN DOCUMENT ON THE REGULARLY SCHEDULED BASIS.
ALSO THE SAME WITH THE 457 PLAN THAT ALSO NEEDS TO BE, YOU KNOW, IS UPDATED, AND THEN NEEDS TO, YOU KNOW, PERIODICALLY NEEDS TO BE AMENDED TO, YOU KNOW, COMPLY WITH LAW CHANGES, THINGS LIKE THAT.
ADOPT THOSE THAT ARE REASONABLE AND APPROPRIATE FOR THE PLAN.
REVIEW COMPLIANCE WITH FEDERAL AND STATE LAW REQUIREMENTS.
I CAN HELP WITH THAT, AND REVIEW PARTICIPANT COMMUNICATIONS.
YOU KNOW, FOR EXAMPLE, THE WEBSITE, YOU KNOW, IS IT USER FRIENDLY? YOU KNOW, DOES IT HAVE THE INFORMATION PEOPLE NEED? PLAN DOCUMENTS OR WHATEVER INFORMATION THAT PARTICIPANTS WOULD BE LOOKING TO THE WEBSITE TO SEE NOTICES ABOUT THINGS LIKE AUTOMATIC ENROLLMENT.
SORRY, CAN YOU CLARIFY, ARE YOU TALKING ABOUT THE RECORD KEEPER'S WEBSITE OR OUR WEBSITE? THE RECORD KEEPER'S WEBSITE, I THINK WELL, AND YOU MAY HAVE YOUR OWN YOU KNOW, INTRANET SITE AS WELL.
[01:05:06]
INVESTMENT DECISIONS AND THINGS LIKE THAT, AND REVIEW ANY AREAS OF RISK OR LITIGATION EXPOSURE TO BE ADDRESSED.OVERALL CONSIDERATIONS FOR MANAGING RISK.
AGAIN, THIS IS SORT OF A SUMMARY.
YOU KNOW, ENSURE PLANS ARE OPERATED IN ACCORDANCE WITH THE PLAN DOCUMENTS, ENGAGE IN PUBLIC, WELL DOCUMENTED PROCESS DEMONSTRATING DUE DILIGENCE, TRANSPARENCY AND INDEPENDENT JUDGMENT. AVOID CONFLICTS OF INTEREST.
MONITOR SERVICE PROVIDERS AND DEVELOP FORMAL WRITTEN POLICIES AND PROCEDURES AND LIKE THE IPS AND KEEP THEM UP TO DATE, AND THAT'S IT.
THANK YOU. ANY QUESTIONS? WELL THANK YOU. THANKS SO MUCH FOR THE PRESENTATION.
EARLIER IN THE PRESENTATION, YOU MENTIONED BREACHES, AND YOU GAVE AN EXAMPLE OF, I THINK LATER ON YOU GAVE EXAMPLES OF BREACH IN PROCESS, BUT WHAT ABOUT THERE WAS A MENTION OF PERSONAL IF YOU WITNESS A PERSONAL BREACH.
WHAT IS THAT? OKAY, YEAH, SO YOU'RE TALKING ABOUT CO-FIDUCIARY? YEAH. YEAH, CO-FIDUCIARY LIABILITY.
WHICH AGAIN GOES TO THE DUTY TO MONITOR SO BASICALLY YOU KNOW A FIDUCIARY CAN BE LIABLE FOR A CO-FIDUCIARY BREACH IN CERTAIN CIRCUMSTANCES.
SO WHETHER THEY FACILITATE THE BREACH OR THEY HAVE KNOWLEDGE OF THE BREACH AND THEY DON'T DO, YOU KNOW, YOU DON'T DO ANYTHING ABOUT IT, YOU KNOW, OR TRY TO GET THE YOUR CO FIDUCIARY TO REMEDY THE BREACH.
THEN YOU COULD BE LIABLE FOR THEIR BREACH AS WELL.
SO THERE COULD BE LIABILITY FOR THE NON BREACHING FIDUCIARY.
MY QUESTION IS, SO WHAT IS THE LIABILITY OF THE BOARD HERE? I MEAN, IT'S NOT PERFORMANCE OF THE INVESTMENTS, BUT MORE PROCESS.
SO WHAT DOES THAT LITIGATION ENTAIL? WHAT IS THAT LIABILITY ENTAIL? WHAT IS THE LIABILITY, YEAH, IT'S A REALLY GOOD QUESTION.
SO THE DAMAGES IN A BREACH OF FIDUCIARY CLAIM ARE GOING TO BE THE LOSSES.
TYPICALLY ARE GOING TO BE THE LOSSES THAT ARE SUFFERED BY.
SO IT COULD BE YOU KNOW, FOR EXAMPLE, YOU KNOW, AGAIN, IT DEPENDS ON THE CASE AND THE FACTS AND ALL THAT BUT, YOU KNOW, IT COULD BE THE DIFFERENCE BETWEEN WHERE YOU PAY, FOR EXAMPLE, YOU KNOW, ALL THESE PARTICIPANTS PAID THESE HIGHER FEES FOR RETAIL CLASS FUNDS AS AN EXAMPLE, BUT THEY COULD HAVE BEEN PAYING MUCH LOWER FEES FOR THESE INSTITUTIONAL CLASS SHARES, AND SO MAYBE THE DAMAGES ARE THE DIFFERENCE, YOU KNOW, BETWEEN WHAT THEY PAID AND WHAT THEY SHOULD HAVE PAID OR WHAT THEY WOULD HAVE PAID HAD THE FIDUCIARY NOT BREACHED ITS DUTY IN, YOU KNOW, IMPRUDENTLY SELECTING THE RETAIL CLASS SHARES, AND IS THERE A RECOURSE FOR THE AGENCY IF THEY FIND A VENDOR HAS BEEN DOING THAT.
I MEAN, CAN THE AGENCY RECOVER THOSE COSTS? THAT'S A GOOD QUESTION, TOO, AND THE ANSWER IS IT DEPENDS.
SO, YOU COULD HAVE A, I MEAN, AND IT DEPENDS ON AGAIN, SO WHAT'S YOUR CAUSE OF ACTION. SO THE BREACH OF FIDUCIARY DUTY.
SO YOU BRING A BREACH OF FIDUCIARY DUTY SUIT AGAINST THE TPA, FOR EXAMPLE.
RIGHT, AND THEY WOULD BE THEY WOULD DEPEND ON WHETHER THEY WERE ACTUALLY ACTING IN A FIDUCIARY CAPACITY.
RIGHT. THEY HAVE TO BE A FIDUCIARY FOR YOU TO BRING A FIDUCIARY BREACH CLAIM AGAINST THEM.
SO THAT'S LIKE NUMBER ONE, RIGHT?
[01:10:01]
AND, AND, YOU KNOW, ALL OF THE TPA'S, IT DOESN'T MATTER WHO YOU KNOW, ALL OF THEM, JUST THEY, YOU KNOW, I TRY TO PUT STUFF IN THE CONTRACT TO SORT OF COUNTERACT IT. WELL, YOU ARE A FIDUCIARY IF YOU ACT LIKE ONE.RIGHT, BUT THEY ALL TRY TO PUT DISCLAIMER LANGUAGE.
I THINK WHATEVER THE CONTRACT SAYS, I THINK YOU COULD ESTABLISH THAT THEY YOU MIGHT BE ABLE TO ESTABLISH IF THEY'RE ACTING IN A FIDUCIARY CAPACITY, THEY'RE MAKING DECISIONS, AND THOSE DECISIONS AND THEY BREACHED THEIR DUTY IN THE DECISIONS THEY MADE.
SO THEY WOULD HAVE TO BE, BUT FREQUENTLY THOSE TYPES OF SUITS ARE BROUGHT IN, LIKE, YOU KNOW, IF IT'S NOT IF THEY'RE NOT FIDUCIARIES, THEN YOU WOULD BE BRINGING THOSE TYPES OF SUITS AGAINST A NON FIDUCIARY LIKE A TPA UNDER LIKE A BREACH OF CONTRACT THEORY OR PROFESSIONAL NEGLIGENCE, SOMETHING LIKE THAT.
OKAY. ANYBODY ELSE? OKAY. DIRECTOR MERCURIO.
YEAH. THANK YOU. SO THANK YOU FOR THAT FIRE HOSE.
[CHUCKLING] APPRECIATE IT. SO SORRY.
YEAH, BUT WE KNEW IT WAS COMING, AND I THINK WE ALL BRACED OURSELVES FOR IT, BUT.
SO YOU GOT MY ATTENTION ON PROCESS.
YOU KNOW, I'M A, YOU KNOW, I THINK GENERALLY, I SUPPORT A STRONG PROCESS IN WHATEVER ANYBODY DOES.
YOU KNOW, I CALL IT A DEFENSIBLE POSITION, YOU KNOW SO.
SO ARE THERE ANY OR MAYBE THIS HAPPENS ANYWAY, BUT ARE THERE ANY AUDITS THAT CAN BE DONE OF PROCESS TO MAKE SURE THAT, YOU KNOW, COMPARING WHAT SHOULD BE DONE TO HOW WE REALLY DO IT, YOU KNOW, LIKE, YOU KNOW, I KNOW WE GET WE GET FINANCIAL AUDITS, BUT IS THERE ANYBODY WHO SPECIALIZES IN THIS SORT OF A THING, OR DO WE HAVE STAFF OR WHATEVER THAT CAN DO AN AUDIT AND SEE IF WE'RE DOING IT RIGHT? YEAH. SO WELL, I THINK THINGS LIKE THE IPS ARE A GOOD START.
LIKE, YOU KNOW, IF YOU TAKE A LOOK AT THE IPS, IT'S VERY THOROUGH, AND THAT'S A GOOD START, RIGHT? YOU KNOW, IT GIVES YOU SOMETHING TO, IT GIVES YOU A PROCESS TO FOLLOW.
IN TERMS OF PEOPLE WHO DO AUDITS, I MEAN, WE DO AUDITS OF, YOU KNOW, WELL, ONE THING IS THE PLANT.
YOU KNOW, I TALKED ABOUT THE ANNUAL PLAN REVIEW.
YEAH, AND THAT'S KIND OF ALONG THOSE LINES.
RIGHT, AND YEAH, WE ASSIST CLIENTS IN PERFORMING, YOU KNOW, AUDITS OF, YOU KNOW, PLAN COMPLIANCE YOU KNOW, FIDUCIARY PROCESSES, THINGS LIKE THAT.
YEAH, BUT YEAH, I THINK, YOU KNOW, LIKE ON A, YOU KNOW, THAT'S, THAT'S SORT OF THE IDEA OF THE ANNUAL REVIEW PROCESS SORT OF VERY BASICALLY THOUGH, BUT JUST TO IT'S AN OPPORTUNITY TO LOOK AT EVERYTHING AND, AND, YOU KNOW, SAY, ARE WE DOING THIS RIGHT? YOU KNOW, OUR PROCESS, ARE WE FOLLOWING THE BEST PRACTICES AND WHICH BEST PRACTICES ARE APPROPRIATE FOR OUR PLAN OR PLANS? YEAH. OKAY, GOOD.
I MAY HAVE WRITTEN THIS DOWN INCORRECTLY.
SO YOU WORK WITH US ON THESE TWO PLANS? THE 457 AND THE 401(A) OR DO YOU WORK WITH US ON ANY OF OUR OTHER PLANS? I ACTUALLY WORK WITH YOU WORK WITH THE DISTRICT ON IN FACT, I'M WORKING ON SOMETHING WITH ONE OF THE PENSION PLANS RIGHT NOW, BUT, YEAH, IT'S SORT OF MY ROLE IS SORT OF EXPANDED.
SO I THINK THAT'S ACTUALLY A GOOD DECISION ON OUR PART AS A DISTRICT.
I GUESS MY OTHER QUESTION IS YOUR FIRM I'M JUST CURIOUS ABOUT YOUR CLIENT MIX.
IS IT MOSTLY PUBLIC LOCAL AGENCIES OR IS IT A MIX BETWEEN PRIVATE AND PUBLIC?
[01:15:06]
IT'S A MIX, BUT PREDOMINANTLY I MEAN, MY PRACTICE IS PREDOMINANTLY PUBLIC SECTOR.OKAY. I HAVE PRIVATE SECTOR CLIENTS AS WELL AND SOME TAX EXEMPT CLIENTS AND THINGS LIKE THAT, BUT PREDOMINANTLY PUBLIC, AND I'VE BEEN DOING IT FOR, I DON'T KNOW, SINCE I WANT TO SAY LIKE 2004, 2005.
SO IT'S YEAH, IT'S A GREAT IT'S A I LOVE WORKING WITH THE PUBLIC.
WELL A LOT OF IT'S JUST THAT, YOU KNOW PEOPLE DO INTERESTING THINGS RIGHT.
LIKE YOU KNOW PARKS ARE COOL I GET THE BENEFIT FROM THE PARKS.
YEAH, AND I SEE YOUR LOCAL; YOU'RE IN SAN FRANCISCO, SO YOU'RE-- YEAH, ACTUALLY I'M LIKE RIGHT DOWN THE 13.
I'M 12 MINUTES. MY OFFICE IS IN SAN FRANCISCO.
SO YOU'RE FAMILIAR. I'M FAMILIAR.
IN OUR ROLE, OUR BOARD ROLE OF OVERSEEING VARIOUS FUNDS, RETIREMENT FUNDS AND OUR OWN SURPLUS FUNDS AND SUCH, WE RELY HEAVILY ON OUR FINANCE COMMITTEE TO DO THE REVIEWS OF INVESTMENT POLICIES THEMSELVES, AS WELL AS INVESTMENT PERFORMANCE REPORTS PERFORMANCE VERSUS BENCHMARKS, AS YOU DESCRIBED, AND I'M WONDERING IF THAT DEGREE, THE DEGREE OF DELEGATION WE GIVE TO OUR FINANCE COMMITTEE IS SOMETHING WE SHOULD BE COMFORTABLE WITH INSOFAR AS WE, AS A FULL BOARD, IN TURN, DO NOT REVIEW THOSE POLICIES OR AMENDMENTS OR INVESTMENT PERFORMANCE VERSUS BENCHMARK REPORTS.
WE HAVE ONE IN OUR BOARD PACKET THIS AFTERNOON.
THEY ARE INSTEAD PLACED ON A CONSENT CALENDAR AS ACCEPTANCE OF AN INVESTMENT REPORT OR A APPROVAL OF THE FINANCE COMMITTEE'S APPROVAL OF INVESTMENT POLICY AMENDMENTS AND SUCH.
IS THAT SOMETHING WE SHOULD BE COMFORTABLE WITH? I'VE GENERALLY BEEN, BUT IT DOES RAISE A QUESTION IN MY MIND, ESPECIALLY WHEN I SEE ON YOUR SLIDES DESCRIPTION OF A BOARD OBLIGATION TO MONITOR AND REVIEW AT LEAST PERIODICALLY OR ANNUALLY AND SUCH, AND WE DON'T DO THAT.
WE RELY ON A CONSENT CALENDAR AFTER OUR COMMITTEE REVIEWS.
I JUST WANT TO BEFORE I WANT TO JUST GIVE ADD SOME INFORMATION SO HE CAN ANSWER YOUR QUESTION.
DIRECTOR COFFEY, NOW THAT WE HAVE A NEW RECORD KEEPER, EMPOWER, AND THE PLAN IS FOR EMPOWER TO COME AND GIVE INVESTMENT REPORTS TO THE FULL BOARD OF DIRECTORS. SO WE JUST STARTED, I CAN'T REMEMBER EXACTLY WHEN THE FIRST TIME THAT THEY'RE COMING TO THE BOARD, BUT I AND I DON'T KNOW IF THE PLAN IS TO BRING THEM TO THE FINANCE COMMITTEE AND THEN TO THE FULL BOARD, BUT I JUST WANT YOU TO KNOW THAT IT WAS MY PLAN TO HAVE THE FULL BOARD BE GIVEN THESE INVESTMENT REPORTS FROM EMPOWER, WHICH WE HAVEN'T BEEN DOING UNDER MISSION SQUARE.
WE'LL GO BACK TO WHAT OUR HISTORY HAS BEEN AS I PRESENTED THE QUESTION.
RIGHT? I MEAN, FREQUENTLY EMPLOYERS DELEGATE TO LIKE A COMMITTEE.
I MEAN, IT COULD BE THE FINANCE COMMITTEE OR IT COULD BE A COMPLETELY INDEPENDENT YOU KNOW, COMMITTEE THAT IS THE PLAN ADMINISTRATOR OR THE INVESTMENT FIDUCIARY FOR THE PLAN. SAY FOR EXAMPLE AND AGAIN, I THINK IT'S REALLY A MATTER I THINK I THINK TWO THINGS.
ONE, AND YOU MENTIONED ONE OF THESE THINGS WHICH IS MONITORING, RIGHT, WHICH IS REALLY IMPORTANT, AND THE OTHER IS SELECTING THE PEOPLE WHO ARE GOING TO BE ON THAT COMMITTEE.
RIGHT. OR HAVING PEOPLE THAT THE BOARD FEELS COMFORTABLE RIGHT AMONGST FROM AMONGST YOUR MEMBERS OR, YOU KNOW, THE BOARD WHO ARE ON THIS COMMITTEE. RIGHT? OR IF YOU APPOINTED A SEPARATE COMMITTEE, RIGHT TO WHICH IS, YOU KNOW, PRETTY COMMON.
IT'S REALLY ABOUT WHO YOU APPOINT TO BE ON THAT BOARD.
[01:20:01]
YOU WANT PEOPLE WHO HAVE THE TIME BANDWIDTH HOPEFULLY SOME KNOWLEDGE.RIGHT, BUT, YOU KNOW, AGAIN, YOU DON'T HAVE TO BE AN EXPERT.
RIGHT, BUT SOME PEOPLE BETTER TO HAVE SOME PEOPLE WHO EVEN BASED ON POSITION EX-OFFICIO, WHATEVER, HAVE EXPERIENCE SOME EXPERIENCE WITH INVESTMENTS OR RETIREMENT PLANS OR, YOU KNOW, THINGS LIKE THAT.
YEAH. MY ASSUMPTION TO MY QUESTION IS THAT WE'RE COMFORTABLE WITH THE PEOPLE WHO WE'VE DELEGATED.
RIGHT. LIKE AND I THINK YOU HAVE AN ONGOING DUTY TO MONITOR.
RIGHT, AND THAT'S A GOOD QUESTION BECAUSE YOU'RE JUST IF IT'S JUST ON CONSENT AND YOU NEVER REALLY LOOK AT IT OR REALLY LOOK AT THE REPORTS OR YOU KNOW, I WOULD WANT TO HAVE MORE, I THINK I WOULD WANT TO PROBABLY HAVE SOME MORE OVERSIGHT.
YOU KNOW, IF IT WERE ME, I'D PROBABLY WANT TO HAVE MORE OVERSIGHT.
JUST KNOWING IN ORDER TO SATISFY THAT DUTY TO MONITOR.
RIGHT. YEAH, THAT'S WHY I HAD ASKED.
YEAH, TO ME, IN A SENSE, IT'S HOW COMFORTABLE AM I WITH THE PERFORMANCE IN GENERAL, AND IF THERE WERE PROBLEMS IN PROCESS OR IN PERFORMANCE THAT ARE IDENTIFIED, I'D WANT MORE FULL BOARD INVOLVEMENT THAN THAN WE'VE HAD HISTORICALLY, BUT YOU ANSWERED THE QUESTION. THANKS.
OKAY. YEAH. THANK YOU. A COUPLE OF QUESTIONS.
SO, YOU KNOW, WHAT I GLEANED OUT OF THIS WHOLE CONVERSATION IS, YOU KNOW, THE IMPORTANCE OF PROCESS AND DOCUMENTATION, AND YOU'VE USED THAT WORD A MILLION TIMES, AND I IT'S SUNK IN SO AND PRUDENTLY MONITOR INVESTMENTS, AND I'M COMING AWAY WITH SOME OF THE EXCESSIVE FEES WOULD BE THE HARDEST PART TO DEAL WITH IN THIS, AND I THINK EVERYTHING'S OUT THERE, BUT IT SEEMS LIKE MY EXPERIENCE IN INVESTMENTS HAVE ALWAYS BEEN BY THIS MUTUAL FUND AND HAD A BIG LOAD ON IT, AND THEN EVERYBODY FOUND OUT ABOUT LOADED MUTUAL FUNDS.
SO THEY ALL WANT NO LOAD MUTUAL FUNDS, RIGHT, AND NOW YOU GET INTO THE FAMILY OF FUNDS AND, OH, EVERYTHING'S FREE AS LONG AS YOU STAY IN THE FAMILY, IF YOU GO OUTSIDE, YOU'RE GOING TO HAVE EXCESS FEES. SO AND YOU MENTIONED THAT SOME THE, THE, THE WHAT WAS IT, THE RETAIL CLASS VERSUS THE INSTITUTIONAL CLASS. IS IT AS SIMPLE, AND OUR DUE DILIGENCE WOULD BE TO SAY NOT TO HAVE OUR CONSTITUENTS, BUT THE PEOPLE PART OF OUR PLAN THAT WE ARE THE FIDUCIARIES FOR WOULD WE WANT TO GET THEM THE BEST DEAL? IS IT AS SIMPLE AS WHEN WE SAY EMPOWER IS GOING TO COME AND TALK? IF ONE OF OUR BOARD MEMBERS WOULD SAY ARE YOU ARE, HOW DO YOU HOW DO YOU MONITOR THAT? DO WE HAVE TO HIRE AN AUDITOR TO DO THAT? OR CAN WE JUST LOOK AT THE GUY IN THE EYE AND SAY, ARE YOU FOR LACK OF A BETTER WORD, IS THIS THE BEST DEAL OR ARE FEES EMBEDDED IN YOUR FAMILIES OF FUNDS, AND ARE THERE HIGHER RATES BASED ON THIS? IS IT AS SIMPLE AS THAT FOR A BOARD? BECAUSE I WANT TO DO MY DUE DILIGENCE, BUT I THINK IT WOULD BE A SIMPLE QUESTION, AND DOES DOES THE PLAN ADMINISTRATOR EMPOWER OR MISSION SQUARE IN THIS CASE, DO THEY HAVE THE OBLIGATION OR THE LEGAL OBLIGATION TO TELL YOU IF YOU BUY IN THIS FAMILY, YOU'RE GOING TO PAY MORE, OR DO THEY GIVE YOU A BREAKDOWN OF FEES? YEAH, REALLY AWESOME QUESTION AND A COUPLE OF THINGS.
ONE, YOU CAN GET FEE DISCLOSURES, RIGHT, AND YOU SHOULD GET FEE DISCLOSURES.
THAT'S REALLY IMPORTANT SO BECAUSE THEY'RE REQUIRED TO PROVIDE THOSE SO YOU CAN FIND OUT WHAT FUNDS COST, BUT YOUR INVESTMENT ADVISOR AND LYNNE IS IT EMPOWER? YEAH. RIGHT NOW IT'S EMPOWER.
IT'S EMPOWER. OKAY. SO THE ROLE OF THE INVESTMENT ADVISOR IS TO LIKE IF YOU HAVE A QUARTERLY MEETING, THEY SHOULD COME TO THAT MEETING AND GIVE YOU A PRESENTATION SORT OF THE GENERALLY IT'S THE SORT OF THE WHOLE LIKE MARKET ENVIRONMENT, WHAT'S GOING ON IN THE MARKET GENERALLY, AND THEN, YOU KNOW, INFLATION, GDP, ALL THAT STUFF.
RIGHT. SO YOU KIND OF HAVE A BUT THEY ALSO SHOULD GIVE YOU DETAILED FUND PERFORMANCE INFORMATION AND AS WELL AS FEES, WHAT ARE WHAT ARE THE COSTS. WHAT ARE THE BASIS POINT FEES, AND, YOU KNOW, YOU'LL BEGIN TO THEY SHOULD TELL YOU, RIGHT? THEY SHOULD HELP YOU DECIDE WHETHER LIKE THE FEES ARE FOR A PARTICULAR FUND OR APPROPRIATE.
[01:25:09]
RIGHT. SO YOU CAN LOOK AT THE FEES WHEN YOU'RE DOING THIS AND YOU LOOK AT THE FEES AND GO, WELL, THAT FEE IS PRETTY HIGH, RIGHT? YOU KNOW, I GOT A BASIS POINT FEE THAT'S SUPER HIGH, AND THEN YOU WOULD ASK QUESTIONS ABOUT IT.RIGHT. SO PART OF IT IS YOU RIGHT, ASKING THOSE QUESTIONS, BUT THE INVESTMENT ADVISOR IS SUPPOSED TO COME TO THE MEETING WITH YOU AND PRESENT KIND OF A AGAIN, STARTING WITH SORT OF LIKE A BROAD OVERVIEW OF THE MARKETS AND THINGS LIKE THAT, BUT THAT GET INTO SPECIFIC FUND PERFORMANCE FEES AND THINGS LIKE THAT, AND THEIR ROLE IS TO WHEN, YOU KNOW, IF YOU HAVE, YOU KNOW, ALWAYS ASK QUESTIONS BECAUSE BUT THEY SHOULD ALSO GUIDE YOU IN IDENTIFYING, FOR EXAMPLE, A FUND THAT IS UNDERPERFORMING.
SO MAYBE AT SOME POINT IN TIME THAT FEE WAS THAT PARTICULAR FUND FILLS A PARTICULAR NICHE AND WAS PERFORMING VERY WELL, BUT THERE'S BEEN A CHANGE IN MANAGEMENT ETC., AND PREVIOUSLY YOU COULD JUSTIFY THE SLIGHTLY HIGHER FEE BECAUSE, YOU KNOW, IT'S IT WAS A GOOD FUND AND NOW IT'S UNDERPERFORMING AND YOU'RE PAYING TOO HIGH A FEE FOR IT.
RIGHT, AND SO THE INVESTMENT ADVISOR SHOULD POINT THAT OUT.
RIGHT. THEY SHOULD BE HELPING YOU TO MONITOR THAT, TO MONITOR PERFORMANCE AS WELL AS.
YOU KNOW, AND AS WELL AS QUANTITATIVE AS WELL AS QUALITATIVE FACTORS.
SO PERFORMANCE BEING QUANTITATIVE BUT ALSO QUALITATIVE FACTORS AND CERTAINLY FEES.
RIGHT, AND YOU KNOW WE GET THIS WHOLE, YOU KNOW LAYOUT.
WE HAVE AN INVESTMENT MANAGER.
THEY ACTUALLY, YOU KNOW, SET UP THESE FUNDS AND YOU KNOW ACTUALLY CREATE LIKE FUNDS THAT ARE LIKE, LIKE A BALANCED MORE AGGRESSIVE WHATEVER.
SO THEY, BUT THEY MAKE THE DECISIONS, BUT THEY COME TO US, THE COMMITTEE MEMBERS, AND THEY PRESENT THIS TO US, AND THEY GO THROUGH THE PERFORMANCE OF ALL THESE FUNDS, AND WE LOOK AT THEM EVERY QUARTER, AND WE LOOK AT THE, YOU KNOW, WE HAVE ALL THE PERFORMANCE DATA IN FRONT OF US COMPARED TO THE BENCHMARK WHAT THE WHAT THE FEES ARE, AND, YOU KNOW, ONE, THREE, FIVE, TEN YEAR PERFORMANCE WHEN COMPARED TO PEERS, AND SO WE LOOK AT THAT AND THAT'S AS A COMMITTEE, YOU KNOW, COMMITTEE MEMBER.
THAT'S MY JOB. RIGHT? I LOOK AT THIS INFORMATION, AND ONE OF THE THINGS I LOOK AT IS FEES.
RIGHT, AND SO THERE MAY BE A FUND THAT I'M LIKE, WHY ARE WE PAYING THIS MUCH FOR THIS FUND? RIGHT AND WOULD SAY THE WHO'S RUNNING THE FUND FOR YOU? WOULD THEY HAVE THE ABILITY TO SAY, YOU'RE RIGHT, THAT'S TOO MUCH.
I MEAN, IF IT'S 50 BASIS POINTS, CAN THEY GO TO 35 AND SAY WE'LL MAKE IT BETTER FOR YOU? 35, AND I GUESS CONVERSELY, IF AND I DON'T WANT TO USE THE WORD EMPOWER, BUT IT'S THE ONLY ONE I KNOW, OR LET'S USE MISSION SQUARE, IF MISSION SQUARE HAS HUNDREDS OF CLIENTS, I WOULD BET, RIGHT? DO THEY HAVE THE ABILITY TO SAY THE EXACT SAME FUND THAT THEY OFFER? THEY OFFER, I THINK 11 DIFFERENT FUNDS OR SOMETHING LIKE THAT, COULD THEY NEGOTIATE WITH EAST BAY REGIONAL PARK DISTRICT AND SAY, WE'RE GOING TO CHARGE YOU 50 BASIS POINTS FOR THIS FUND AND THEN GO TO EAST BAY MUD OR SOME OTHER GOVERNMENT AGENCY AND SAY, WE'RE GOING TO GIVE IT TO YOU FOR 20.
DO THEY HAVE THE ABILITY TO GO NEGOTIATE THAT THROUGH? YES. YEAH.
THE ADVISOR, INVESTMENT ADVISORS AND MANAGERS DO HAVE THE ABILITY TO YOU KNOW, TRY TO NEGOTIATE.
WELL, PART OF IT SO YOU'RE RELYING.
YEAH. AGAIN. SO THIS IS SORT OF THE EXPERT, RIGHT? YOU'RE RELYING ON THE EXPERT.
SO YOU HAVE AN INVESTMENT ADVISOR.
YOU'RE RELYING ON YOUR INVESTMENT ADVISOR AS AN EXPERT, RIGHT, TO PROVIDE YOU WITH INFORMATION AND ALSO GIVE YOU THEIR THEIR TAKE ON THINGS AND ALSO TO HELP YOU POTENTIALLY NEGOTIATE.
[01:30:06]
THAT'S SO YOU ARE RELYING ON THE INVESTMENT ADVISOR, WHO IS THE EXPERT IN THIS, TO PROVIDE YOU WITH THAT INFORMATION SO THAT YOU CAN LOOK AT IT AND SAY, OKAY, WELL, I'M LOOKING AT THIS AND, YOU KNOW, YOU'VE TOLD ME THAT, YOU KNOW, WE'RE GETTING CHARGED.YOU KNOW, THIS IS A HIGH FEE, AND WHY ARE WE GETTING IS THERE IS THERE CAN WE GET THE SAME THING IN A LOWER COST. RIGHT.
THEY'RE SUPPOSED TO BE THE EXPERTS AND YOU'RE RELYING ON THEM TO BE EXPERTS, AND YOU KNOW, AND THEY ARE SUPPOSED TO BE PROVIDING YOU WITH THE INFORMATION YOU NEED TO LOOK AT IT AND SAY, WAIT A SECOND.
I DON'T THINK WE SHOULD BE PAYING THAT MUCH.
SO IS THERE ANOTHER FUND OR FUND FAMILY AVAILABLE THAT WE THAT'S AVAILABLE ON THIS PLATFORM THAT WE CAN USE REPLACE THIS FUND WITH.
SO WE GET THE SAME RESULT WITH LOWER FEES.
ARE THERE ANY FUNDS THAT WE COULD DO THE SAME THING FOR LESS MONEY? ALL RIGHT. THANK YOU, AND FINALLY, I GUESS A QUESTION OF MANAGEMENT.
DO WE HAVE FIDUCIARY LIABILITY INSURANCE OR IS THAT COVERED UNDER OUR SELF-INSURED LIABILITY? RIGHT NOW, I THINK WE HAVE IT'S SELF-INSURED.
WE DO NOT HAVE A SPECIFIC FIDUCIARY LIABILITY POLICY.
SO IT'S SOMETHING WE CAN LOOK INTO.
OKAY. I THINK WE HAD ONE MORE QUESTION FROM DIRECTOR SANWONG.
OKAY. DOES ANYONE HAVE ANYTHING ELSE PRESSING? ONE MORE AGENDA ITEM.
ACTUALLY, IN THE IN THE NEXT MEETING.
WELL, ACTUALLY ALL OF MY QUESTIONS WERE ANSWERED.
COLIN ASKED WHAT I WANTED TO ASK.
YOU MANAGED TO MAKE THIS QUITE CLEAR, AND I THINK YOU GOT YOUR MESSAGE ACROSS, SO THANK YOU.
THANK YOU VERY MUCH, AND THANKS FOR THE OPPORTUNITY TO TALK WITH YOU I APPRECIATE IT.
SO NOW WE WILL ADJOURN THE SPECIAL.
JUST WANT TO TAKE PUBLIC COMMENT.
OH, I'M SORRY, I WASN'T AWARE OF THAT.
OKAY, IF THEY HAVE ANY PUBLIC COMMENT, I JUST WANT TO MAKE SURE WE.
OH, SURE. OKAY. SO, MADAM CLERK, DO WE HAVE ANY PUBLIC COMMENTS? WELL, LET'S ASK IN THE ZOOM ROOM IF THERE'S IF THERE'S ANYONE WHO HAS A QUESTION OR COMMENT, PLEASE RAISE YOUR HAND.
OTHERWISE WE DO NOT HAVE ANY PUBLIC COMMENT AND I'M NOT SEEING ANYBODY APPEAR.
THANK YOU.
* This transcript was compiled from uncorrected Closed Captioning.