- 32 -
in accordance with the terms of the plan; and (4) the safeguards
and diversity that a prudent investor would adhere to must be
present. We previously have indicated that the criteria listed
in Rev. Rul. 69-494, supra, although not binding on the Court,
are relevant to a determination as to whether the prudent
investor requirements have been satisfied. Winger's Dept. Store,
Inc. v. Commissioner, 82 T.C. 869 (1984); Feroleto Steel Co. v.
Commissioner, 69 T.C. 97 (1977); see also Ada Orthopedic, Inc. v.
Commissioner, supra.
Additionally, in applying the prudent investor rule, it has
been stated:
Under ERISA, as well as at common law, courts have focused
the inquiry under the "prudent man" rule on a review of the
fiduciary's independent investigation of the merits of a
particular investment, rather than on an evaluation of the
merits alone. As a leading commentator puts it, "the test
of prudence--the Prudent Man Rule--is one of conduct, and
not a test of the result of performance of the investment.
The focus of the inquiry is how the fiduciary acted in his
selection of the investment, and not whether his investments
succeeded or failed." In addition, the prudent man rule as
codified in ERISA is a flexible standard: the adequacy of a
fiduciary's investigation is to be evaluated in light of the
"character and aims" of the particular type of plan he
serves. [Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th
Cir. 1983); fn. ref. omitted; citations omitted.]
Thus, the ultimate outcome of an investment is not proof that the
investment failed to meet the prudent investor rule. DeBruyne v.
Equitable Life Assur. Socy. of U.S., 920 F.2d 457, 465 (7th Cir.
1990); see also Norton Bankruptcy Law and Practice 2d, sec. 156:9
(1997-98).
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