Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 1 of ...

Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 7 of 36 PAGEID #: 7safeguarding the return of principal, minimize the risk of default, and maximizecurrent income within risk parameters defined in the Guidelines.”22. The SLA’s Collateral and Investment Guidelines also set forth certainexpress credit quality standards for any investments Wachovia made on SERS’ behalf,including a prohibition on buying securities falling below certain credit rating thresholdsset by the nationally recognized securities rating organizations, Standard & Poors,Moody’s and Fitch.23. If the credit rating of an investment was later downgraded below theinitially acceptable levels after the investment was made, the Collateral InvestmentGuidelines provided that the Investment Manager (Wachovia) was to make thedetermination whether to dispose of the investment if it is “prudent to do so in light of theinvestment objectives of the Portfolio.”24. The SLA required Wachovia to perform its services in good faith and inaccordance with applicable law. Section 10.1 of the SLA also made Wachovia liable fornegligence, bad faith or willful misconduct.25. For brokering the lending of securities and managing the investmentsmade with the cash collateral, Wachovia received 17% of the Net Income from theinvestments made with the cash collateral during each reporting period.This wassubsequently reduced to 15% effective June 1, 2009 by agreement of the parties.26. Pursuant to the SLA, Wachovia had discretionary authority to invest thecash collateral consistent with the objectives and investment guidelines.Wachoviaoperated as SERS’ investment advisor and as such owed a fiduciary duty of utmost7