[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.
____________________