Academic journal article Journal of Accountancy

Accountant Is Not a Fiduciary under ERISA

Academic journal article Journal of Accountancy

Accountant Is Not a Fiduciary under ERISA

Article excerpt

Afederal court in Rhode Island held that an accountant who recommended an investment to an employee benefit plan was not a "fiduciary" under the Employee Retirement Income Security Act.

The accountant had recommended an investment in a mortgage company to the employee benefit plan. The plan trustees authorized the transfer of $130,000 to a partnership, North Main Street Associates, which then transferred the investment to the mortgage company. The accountant who had recommended the investment was also a partner in North Main Street Associates.

An additional responsibility of the accountant to the plan was to assure assignments of mortgages from the mortgage company to North Main Street. These mortgages were to serve as collateral for the investment. The accountant did not receive these assignments. The plan subsequently lost its entire investment. When the investment failed, had the collateral existed, the plan could have used that collateral to lessen the investment loss. The trustees alleged the accountant had breached a fiduciary duty under ERISA in recommending the investment and failing to procure proper security. …

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