Portfolio Monitoring Agreements

Last Friday, I mentioned the recent controversy in the Merrill Lynch subprime class action regarding conflicts of interest that could result from the sorts of monitoring agreements routinely employed by plaintiffs firms looking for pension fund clients.  Here’s a redacted example of such an agreement:

Maybe I’m missing something but either this agreement is invalid for lack of mutual consideration or the pension fund is agreeing to retain the law firm if the fund decides to bring an action as a result of information provided by the firm under this monitoring agreement.  It’s no wonder the judge in the Merrill case based his decision on the testimony of the fund trustees rather than the mealy-mouthed language of the actual monitoring agreements.

Filed under: Law & Politics, Litigation, institutional investors, monitoring agreements, pension funds, PSLRA