[Congressional Record Volume 143, Number 147 (Tuesday, October 28, 1997)]
[House]
[Pages H9575-H9576]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 AMENDMENTS

  Mr. FAWELL. Mr. Speaker, I move to suspend the rules and pass the 
Senate bill (S. 1227) to amend title I of the Employee Retirement 
Income Security Act of 1974 to clarify treatment of investment managers 
under such title.
  The Clerk read as follows:

                                S. 1227

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. INVESTMENT MANAGERS UNDER ERISA TO INCLUDE 
                   FIDUCIARIES REGISTERED SOLELY UNDER STATE LAW 
                   ONLY IF FEDERAL REGISTRATION PROHIBITED UNDER 
                   RECENTLY ENACTED PROVISIONS.

       (a) In General.--Section 3(38)(B) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(38)(B)) is amended--
       (1) by redesignating clauses (ii) and (iii) as clauses 
     (iii) and (iv), respectively; and
       (2) by striking ``who is'' and all that follows through 
     clause (i) and inserting the following: ``who (i) is 
     registered as an investment adviser under the Investment 
     Advisers Act of 1940; (ii) is not registered as an investment 
     adviser under such Act by reason of paragraph (1) of section 
     203A(a) of such Act, is registered as an investment adviser 
     under the laws of the State (referred to in such paragraph 
     (1)) in which it maintains its principal office and place of 
     business, and, at the time the fiduciary last filed the 
     registration form most recently filed by the fiduciary with 
     such State in order to maintain the fiduciary's registration 
     under the laws of such State, also filed a copy of such form 
     with the Secretary;''.
       (b) Availability of Documents Via Filing Depository.--A 
     fiduciary shall be treated as meeting the requirements of 
     section 3(38)(B)(ii) of the Employee Retirement Income 
     Security Act of 1974 (as amended by subsection (a)) relating 
     to provision to the Secretary of Labor of a copy of the form 
     referred to therein, if a copy of such form (or substantially 
     similar information) is available to the Secretary of Labor 
     from a centralized electronic or other record-keeping 
     database.
       (c) Effective Date.--The amendments made by subsection (a) 
     shall take effect on

[[Page H9576]]

     July 8, 1997, except that the requirement of section 
     3(38)(B)(ii) of the Employee Retirement Income Security Act 
     of 1974 (as amended by this Act) for filing with the 
     Secretary of Labor of a copy of a registration form which has 
     been filed with a State before the date of the enactment of 
     this Act, or is to be filed with a State during the 1-year 
     period beginning with such date, shall be treated as 
     satisfied upon the filing of such a copy with the Secretary 
     at any time during such 1-year period. This section shall 
     supersede section 308(b) of the National Securities Markets 
     Improvement Act of 1996 (and the amendment made thereby).

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Illinois [Mr. Fawell] and the gentleman from California [Mr. Martinez] 
each will control 20 minutes.
  The Chair recognizes the gentleman from Illinois [Mr. Fawell].
  Mr. FAWELL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker I am pleased today to rise to seek passage of Senate 
1227, legislation which amends title I of the Employee Retirement 
Income Security Act, known as ERISA, to permit investment advisors 
registered with State securities regulators to continue to serve as 
investment managers to ERISA plans.
  Mr. Speaker, Senate bill 1227 is identical to H.R. 2226, which I 
introduced on July 23, 1997, with the cosponsorship of the gentleman 
from New Jersey [Mr. Payne], ranking member on the Subcommittee on 
Employer-Employee Relations.
  At the end of last Congress, landmark bipartisan legislation was 
enacted which adopted a new approach for regulating investment 
advisers, the Investment Advisors Supervision Coordination Act. Under 
the act, beginning July 8, 1997, States are assigned primary 
responsibility for regulating smaller investment advisors and the 
Securities and Exchange Commission is assigned primary responsibility 
for regulating larger investment advisors.
  Mr. Speaker, under this framework, however, smaller investment 
advisors registered only by the States, and prohibited by the new law 
from registering with the SEC, would no longer meet the definition of 
investment manager under ERISA, since the current Federal law 
definition only recognizes advisers registered with the SEC.
  As a temporary measure, a 2-year sunset provision was included in the 
securities reform law extending for 2 years the qualification of State 
registered investment advisers as investment managers under ERISA. This 
provision was intended to address the problem on an interim basis while 
congressional committees with jurisdiction over ERISA reviewed the 
issue. We have reviewed this issue and have developed Senate bill 1227 
and H.R. 2226 to permanently correct this oversight.
  Without this legislation, State-licensed investment advisers who, 
because of the securities reform law, no longer are permitted to 
register with the SEC would be unable to continue to be qualified to 
serve as investment managers to pension and welfare plans covered by 
ERISA. Without this bill, the practice of thousands of small investment 
advisers and investment advisory firms would be seriously disrupted 
after October 10, 1998, as would the 401(k) and other pension plans of 
their clients.
  It is necessary for an investment adviser seeking to advise and 
manage the assets of an employee benefit plan subject to ERISA to meet 
ERISA's definition of investment manager. It is also important for 
business reasons for small investment advisers to eliminate the 
uncertainty about their status as investment managers under ERISA. This 
uncertainty makes it difficult for such advisers to acquire new ERISA 
plan clients and could well cause the loss of existing clients.
  Mr. Speaker, the bill will amend title I of ERISA to permit an 
investment adviser to serve as an investment manager to ERISA plans if 
it is registered with either the SEC or the State in which it maintains 
its principal office and place of business, if it could no longer 
register with the SEC as a result of the requirements of the 1996 
securities reform law.
  In addition, the bill requires that whatever filing is made by the 
investment adviser with the State be filed with the Secretary of Labor 
as well. The Department of Labor has asked for this dual filing with 
the Department and has assured the Congress that it needs no additional 
resources to process the forms.
  This legislation has the support, therefore, of the Department of 
Labor. Arthur Levitt, Chairman of the Securities and Exchange 
Commission, has written to the Committee on Education and Workforce, 
expressing the need for this legislation and his support for this 
effort to correct this problem.
  In addition, the bill is supported by the International Association 
of Financial Planning, the Institute of Certified Financial Planners, 
the National Association of Personal Financial Advisers, the American 
Institute of Certified Public Accountants, and the North American 
Securities Administrators Association, Inc.
  By passing this legislation today we will correct this oversight in 
the securities reform law, thus protecting small advisers from 
unintended ruin and bringing stability to the capital management 
marketplace. I urge its passage.
  Mr. Speaker, I reserve the balance of my time.
  Mr. MARTINEZ. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise today to speak on S. 1227, the ERISA rules for 
investment managers. Usually this legislation would be managed by the 
gentleman from New Jersey [Mr. Payne]. Unfortunately, he has been 
detained. I do, however, want to compliment him for his leadership on 
this issue.
  Mr. Speaker, the 104th Congress passed the Investment Advisers 
Supervision Coordination Act, which made a change in the ERISA 
definition of investment manager. This change would have had 
unforeseen, potentially damaging effects on smaller investment firms. 
Because these investment advisers would not qualify as plan fiduciaries 
under ERISA, they would no longer be able to administer plan assets.
  S. 1227 would require firm advisers that administer less than $25 
million in plan assets to register with the Department of Labor, and 
the idea that the Department of Labor would be the central database of 
investment advisers is a good one. Furthermore, this action will 
preserve the ability of these advisers to act as plan fiduciaries. This 
proposal that is before us now would restore current law and 
reestablish systemic uniformity.
  Mr. Speaker, I commend the gentleman from Illinois [Mr. Fawell], 
chairman of the Subcommittee on Employer-Employee Relations, and the 
gentleman from New Jersey [Mr. Payne], ranking member of the 
subcommittee, cosponsoring the House version of the bill, and I urge my 
colleagues to support S. 1227.
  Mr. MARTINEZ. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. FAWELL. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Illinois [Mr. Fawell] that the House suspend the rules 
and pass the Senate bill, S. 1227.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate bill was passed.
  A motion to reconsider was laid on the table.

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