[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1677 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 1677
To amend title I of the Employee Retirement Income Security Act of 1974
to create a safe harbor for retirement plan sponsors in the designation
and monitoring of investment advisers for workers managing their
retirement income assets.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 13, 2001
Mr. Bingaman (for himself and Ms. Collins) introduced the following
bill; which was read twice and referred to the Committee on Health,
Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
to create a safe harbor for retirement plan sponsors in the designation
and monitoring of investment advisers for workers managing their
retirement income assets.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Independent Investment Advice Act of
2001''.
SEC. 2. SAFE HARBOR FOR PLAN SPONSORS DESIGNATING INVESTMENT ADVISERS.
(a) In General.--Section 404 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end
the following new subsection:
``(e)(1) In the case of a pension plan which provides individual
accounts and permits a plan participant or beneficiary to exercise
control over the assets in such an account, if a plan sponsor or other
person who is a fiduciary designates and monitors a qualified
investment adviser pursuant to the requirements of paragraph (3), such
fiduciary--
``(A) shall be deemed to have satisfied the requirements
under this section for the prudent designation and periodic
review of an investment adviser with whom the plan sponsor or
other person who is a fiduciary enters into an arrangement for
the provision of advice referred to in section 3(21)(A)(ii),
``(B) shall not be liable under this section for any loss,
or by reason of any breach, with respect to the provision of
investment advice given by such adviser to any plan participant
or beneficiary, and
``(C) shall not be liable for any co-fiduciary liability
under subsections (a)(2) and (b) of section 405 with respect to
the provision of investment advice given by such adviser to any
plan participant or beneficiary.
``(2) For purposes of this subsection:
``(A) The term `qualified investment adviser' means, with
respect to a plan, a person--
``(i) who is a fiduciary of the plan by reason of
the provision of investment advice by such person to a
plan participant or beneficiary;
``(ii) who--
``(I) is registered as an investment
adviser under the Investment Advisers Act of
1940 (15 U.S.C. 80b-1 et seq.),
``(II) is registered as an investment
adviser under the laws of the State in which
such adviser maintains the principal office and
place of business of such adviser, but only if
such State has an examination requirement to
qualify for such registration,
``(III) is a bank or similar financial
institution referred to in section 408(b)(4),
``(IV) is an insurance company qualified to
do business under the laws of a State, or
``(V) is any other comparably qualified
entity which satisfies such criteria as the
Secretary determines appropriate, consistent
with the purposes of this subsection; and
``(iii) who meets the requirements of subparagraph
(B).
``(B) The requirements of this subparagraph are met, if
every individual employed (or otherwise compensated) by a
person described in subparagraph (A)(ii) who provides
investment advice on behalf of such person to any plan
participant or beneficiary, is--
``(i) an individual described in subclause (I) or
(II) of subparagraph (A)(ii),
``(ii) registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.),
``(iii) a registered representative as described in
section 3(a)(18) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)(17)), or
``(iv) any other comparably qualified individual
who satisfies such criteria as the Secretary determines
appropriate, consistent with the purposes of this
subsection.
``(3) The requirements of this paragraph are met, if--
``(A) the plan sponsor or other person who is a fiduciary
in designating an investment adviser, and annually thereafter,
receives in writing verification that the investment adviser--
``(i) is and remains a qualified investment
adviser,
``(ii) acknowledges it is a fiduciary with respect
to the plan and is solely responsible for its
investment advice,
``(iii) has reviewed the plan documents including
investment options and upon review has determined that
its relationship with the plan and the investment
advice provided to any plan participant or beneficiary,
including any fees or other compensation it will
receive, will not constitute a violation of section
406, and
``(iv) has the necessary insurance coverage (as
determined by the Secretary) for any claim by any plan
participant or beneficiary;
``(B) the plan sponsor or other person who is a fiduciary
in designating a qualified investment adviser reviews the
following documents it receives from such adviser and
determines that there is no material reason not to enter into
an arrangement for the provision of advice by such qualified
investment adviser:
``(i) The contract with the plan sponsor or other
person who is a fiduciary for the services to be
provided by the investment adviser to the plan
participants and beneficiaries.
``(ii) A disclosure as to any fees or other
compensation that will be received by the investment
adviser for the provision of such investment advice.
``(iii) The Uniform Application for Investment
Adviser Registration as filed with the Securities and
Exchange Commission or a substantially similar
disclosure application as determined by and filed with
the Secretary; and
``(C) the plan sponsor or other person who is a fiduciary
determines whether or not to continue the designation of the
investment adviser as a qualified investment adviser within 30
days of having information brought to its attention that the
investment adviser is no longer qualified or that a substantial
number of plan participants or beneficiaries raise concerns
about the services being provided by the investment adviser.
``(4) Any qualified investment adviser that acknowledges it is a
fiduciary pursuant to paragraph (3)(A)(ii) shall be deemed a fiduciary
under this part with respect to the provision of investment advice to a
plan participant or beneficiary.
``(5) Any recovery to the plan under section 409 as a result of a
fiduciary breach by a qualified investment adviser under this part
shall inure to the benefit of the individual accounts of the affected
plan participants or beneficiaries.''.
(b) Effective Date.--The amendment made by this section shall apply
with respect to advisers designated on or after the date of the
enactment of this Act.
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