Former Pension Advisor Pays City of Cranston $100,000 Following Dispute
GoLocalProv News Team
Former Pension Advisor Pays City of Cranston $100,000 Following Dispute
The dispute was filed by Cranston in November 2020 against Janney Montgomery Scott, the city's then-pension advisor.
Cranston complained that the fees associated with their accounts were not fully disclosed and were higher than stated between 2009 and 2020 — and that investments made in a hedge fund and an annuity were not suitable.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe complaint was filed under former Cranston Mayor Allan Fung’s administration, after top SEC whistleblower Edward Siedle’s fiduciary review of the City of Cranston Fire and Police pension plans found “consistent and dramatic underperformance” of investments.
Siedle recommended that the pension fund go with a “new pension advisor…[one] without a myriad of conflicts.”
According to the city, Janney Montgomery Scott paid Cranston $100,000 in the settlement, including lawyers' fees.
“We settled to save money on legal fees over the long haul, sometimes it’s better to do that,” Cranston Mayor Ken Hopkins told GoLocal when reached for comment.
Janney Montgomery Scott Responds
“The claim by the prior administration was without merit and contained numerous inaccuracies and conclusions. While Janney believes we would have prevailed in arbitration, we are pleased to have resolved the matter for a small settlement to prevent additional legal costs,” said Janney Montgomery Scott in a statement to GoLocal. “We are proud to have worked with the city for over a decade and look forward to continuing to do so.”
The city now utilizes Canton Hathaway as its pension advisor.
In his 52-page report in 2020, Siedle outlined how now former investment manager Janney Montgomery Scott was hired in 2009 as the “non-discretionary investment consultant to provide independent, objective advice regarding investment objectives and restrictions, allocation of assets, selection of asset managers, monitoring performance of asset managers, and making recommendations for changes.”
“However, it does not appear JMS has ever served as a truly non-discretionary advisor to the pension. To make matters even more confusing, with respect to substantial assets that JMS-recommend affiliates manage, in accounts clearly designated as discretionary, the firm claims to have always consulted with the board for the approval of JMS’ investment recommendations,” wrote Siedle.
"I am certainly appreciative of the comprehensive and thorough report that Ted did for the city. It’s needed for many pension funds across the county, and it certainly has awoken my eyes to how pension funds need to operate," said Fung at the time.
"We were looking before [for a new advisor]," Fung added in 2020. "But Siedle outlined how the fund should be set up to avoid conflicts and hidden fees, and the extent of disclosures necessary from who's handling these precious funds."
Janney Montgomery Scotty contested the conclusions in Siedle’s report.