[Congressional Record Volume 147, Number 158 (Thursday, November 15, 2001)]
[House]
[Pages H8202-H8210]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         PARLIAMENTARY INQUIRY

  Mr. BOEHNER. Parliamentary inquiry, Mr. Speaker.
  The SPEAKER pro tempore (Mr. LaHood). The gentleman will state it.
  Mr. BOEHNER. Mr. Speaker, we just have the remaining time we expect 
to use. Who has the right to close, or what would the order of closing 
be?
  The SPEAKER pro tempore. The Committee on Ways and Means will finish 
their time first, and then the gentleman from Ohio (Mr. Boehner) has 
the right to close.
  Mr. BOEHNER. I thank the Chair.
  Mr. McDERMOTT. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, sometimes when I come out on this floor I think I have 
entered the French theater of the absurd.
  We are having a bill brought here to us about financial advice. I 
remember, when this year started, that we had $5.6 trillion in surplus, 
and all the discussion was about what should we do with it: Shall we 
pay off the debt? Shall we save it for Social Security? Shall we save 
it for Medicare?
  The decision was, oh, the first thing we should do is give about $2 
trillion of it away.

                              {time}  1230

  We are going to do that with a tax break. We said it is 130 trillion, 
but it

[[Page H8203]]

turned out to be more like two, and so we go.
  We have now spent all the Social Security money. That is the advice 
we are giving to the American people, and then we say, we want to turn 
you over to the hands of these nice salesmen, they will take care of 
you. We have taken away their medical security. We have not even put 
the money that they contributed into the Medicare program. If we were 
under ERISA, we would be before the courts for the way we are handling 
the investments of our constituents.
  We got so wild around here with our tax cuts and all the problems 
after they figured it all out, and said, well, we need an economic 
stimulus bill. So we come out here with a nonsense bill, give it 
another $161 billion off to major companies in this country. This is 
our advice to America. This is what we think and then this bill is the 
follow-on.
  That nonsense of the stimulus package has run into the ditch over in 
the Senate. I never thought I would count on another body to save us 
from ourselves. I know they are going to save us from this bill 
ultimately. This really looks to me like, the other bill, sort of a 
fund-raising bill, and when I stand here and think about it and listen 
to all this talk, I cannot help thinking about my grandfather.
  He was an Irish immigrant, went to the second grade. He could read 
the newspaper a little bit and he could sign his name. That was the 
basis of his education. He was a hod carrier down in central Illinois, 
and in the 1920s, there was a scam in this country. A guy named Samuel 
Insull was selling energy stock or utility stock all over the country, 
and the whole rage in this little town where my grandparents lived, 
Streator, Illinois, everybody was buying Insull stock, you have got to 
buy Insull stock, you are going to get rich, real rich real quick. 
Everybody in the neighborhood was borrowing and putting their money 
into the Insull business.
  My grandmother came to my grandfather and said, well, Jim, I think we 
should buy some of that Insull stock, and he said to her, if this is 
such a good idea, why are those boys from Chicago down here in the 
cornfield selling it to us? He did not put any of his money in. He said 
we have got $500 in the bank. I tell you what, Jane, you can take your 
250 and put it in the stock, but I am keeping mine in the bank.
  She followed his advice, and they had their money when Insull went 
belly up in 1929, and everybody in Streator, Illinois, lost every 
blooming dime they had put in it.
  Investment advice to ordinary people is a big issue. If you are a hod 
carrier or you are a cab driver or you are doing any one of a number of 
jobs in this country and you are suddenly faced with this question of 
what should I do with my money for when I get old and somebody comes to 
you who has a conflict of interest about it, what do you do at that 
point? You say to your employer, give me another advisor.
  The bill does not allow that. It does not say you can give me this 
guy with the vested interest, but I would also like one who is just 
sort of on my side maybe, and maybe I can get back at him if he gives 
me bad advice. We say to the workers of this country, we are going to 
take this away from you at the very time when we are acting financially 
as irresponsible as we could be.
  We are the Congress. If it was run by the House of Representatives, 
we would be borrowing money right now to give back to the companies of 
this country $25 billion they paid back in 1986. That is the kind of 
financial advice we are giving this country. We are saying, well, we 
are going to stimulate things, we are going to give money back to IBM 
and Ford and all those companies while they are laying people off. We 
give $15 billion to the airlines because we do not want them to get in 
trouble, right, and all those investment people are out there selling 
those stocks, right, keep buying that American Airlines and United 
Airlines and all those stocks.
  So we give them $15 billion. We are going to stabilize it. We do not 
give one single penny to the workers for their health insurance or for 
their unemployment, and they lay off 100,000 people in the airline 
industry, and Boeing lays off 30,000 because when the airline industry 
goes down, so does Boeing go down and everybody else; but they have 
still got their 401(k), and we say, well, we are going to give you an 
advisor to tell you what to do with your money, and that is business.
  I say this is bad legislation. It looks to me like a fund-raising 
piece, not a real serious effort to take care of people's investments. 
If the amendments that were offered here were accepted, all of us would 
be in favor of it. We think people ought to have advice, but it has got 
to be advice that is not conflicted, that does not have its own pocket 
interest, and I think that we will have a substitute offered by the 
gentleman from New Jersey (Mr. Andrews) and the gentleman from New York 
(Mr. Rangel) which will fix this bill, but I urge people to vote 
against the bill.
  Mr. Speaker, I yield back the balance of my time.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I 
may consume.
  There is a broad consensus that workers need access to expert 
investment advice. I did not know we were going to talk about tax 
relief and other subjects, but there are only 16 percent of 401(k) 
participants that have access to investment advice through their 
retirement plans, and only 17 percent have access through outside 
advisors. Seventy-five percent of full-time employees surveyed said 
they would take advantage of individualized advice service if their 
employers offered it, and we have been hearing about banks.
  Banks are regularly examined. Examinations occur frequently. Bank 
tellers cannot provide investment advice. Bank trust departments have a 
long history of trust investment, and they have been managing trusts 
for over two centuries. Banks manage over $2 trillion in employment 
benefit trusts, and banks have strong capital, which provides added 
protection for funds being invested. I doubt there is a bank in this 
country that would allow their trust department to make bad advice 
because the bank would be out of business.
  Recent market volatility tells us investment decisions must be based 
on solid and experienced judgment. Yet, as of today, we continue to 
deny our employees the same tools that corporations and unions are 
allowed to use in making sound investment decisions for their defined 
benefit plans. This bill changes that. Simply put, this measure ends 
investment ignorance and provides workers full control over their 
investment decisions. It repeals an outdated 1974 law that denies 
millions of Americans access to investment advice that could help them 
make the most of their retirement savings.
  No longer will wealthy individuals be the only ones to enjoy the 
luxury of being able to afford their own professional investment 
advice. Now low and middle income Americans will have the same choice.
  Since individuals bear the risk of stock market volatility in their 
401(k) accounts, they are the ones who must have advice on how to 
better diversify their portfolios so they are financially prepared for 
retirement.
  H.R. 2269 will permit employers to offer investment advice as an 
employee benefit. This legislation does not require any employer to 
contract with an investment advisor and no employee is under any 
obligation to accept or follow any advice.
  This bill is good policy for today's workers and tomorrow's retirees. 
That is why the bill has been endorsed by the Department of Labor, the 
Department of Treasury and the Department of Commerce.
  In testifying before my subcommittee, Department of Labor Assistant 
Secretary Ann Combs praised the bill and said, ``We believe the bill 
creates a strong protective framework for the provision of investment 
advice to participants. Both the Committee on Ways and Means and the 
Committee on Education and the Workforce have worked hard to take a 
balanced approach for increasing worker access to advice while 
including safeguards to protect employees' interests.
  I urge Members to join all of us in supporting H.R. 2269. Without it, 
millions of Americans will be in the dark in protecting and growing 
their retirement nest egg.
  Mr. Speaker, I yield back the balance of my time.

[[Page H8204]]

  Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I urge my colleagues to vote against this bill. People 
need investment advice, that is true, but it is also true they are 
getting it from the independent sources that are out there in 
increasingly high numbers.
  Just 2 years ago only 17 percent of employers were offering 
investment advice options; today it is up to 31 percent, nearly double, 
and it is growing. When someone goes for investment advice and the 
advice is being given by a conflicted advisor, that conflict ought to 
be disclosed at the time of the decision. That does not happen under 
this bill.
  The advisor ought to be completely qualified and accountable. That 
does not happen under this bill. The person receiving the advice ought 
to know that he or she has other independent choices. That does not 
happen under this bill. And if the advice that is given is bad and 
hurts the investor, there ought to be adequate remedies to make that 
investor whole. That does not happen under this bill.
  For all of these reasons, and the others stated by my colleagues, I 
would urge a vote against the underlying legislation.
  Mr. Speaker, I yield back the balance of my time.
  Mr. BOEHNER. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, I think all of us agree that we want to do everything 
possible to improve the retirement security of all American workers. 
And I think, based on what we have heard here today, all of the Members 
believe that providing investment advice for those employees who have 
self-directed pension accounts is vital.
  In 1974, when ERISA was enacted, 95 percent of pension assets were in 
defined benefit programs. And no one in 1974 with the enactment of 
ERISA ever envisioned that we would have the number of self-directed 
accounts, such as 401(k) accounts, and the amount of participation and 
the huge shift in assets away from defined benefit plans towards 
defined contribution plans.
  What that has done is leave us in a situation today, where millions 
of American workers have trillions of dollars in their retirement 
savings, that basically they are left to their own ability to hire an 
investment advisor, because under the law as written in 1974, we have 
so protected and insulated American workers that there is really no 
place they can turn for advice. And so where do they turn for advice? 
They turn to Bob at the coffee shop.
  So what we are trying to do here in this bill today is to provide a 
mechanism for providing specific investment advice to employees while 
providing safeguards to protect their retirement security. We believe 
that there has to be a balance between the offering of the advice and 
the amount of protections.
  Is there risk involved in this bill? Yes, there is. Do we think 
American workers are smart enough and bright enough to make these 
decisions? Yes, they are.
  It is a completely voluntary program for employers and employees. 
Once the advice is given within the safeguards that will be outlined in 
this bill, the employee has no inhibitions about making their own 
decisions about how they want to allocate their assets and their needs 
based on their own retirements.
  The problem that we have with the additional safeguards that are 
being proposed here is that they will so restrict the ability to get 
advice that we will get what we have today and that is no advice at 
all. Now, if our goal truly is to provide more investment advice for 
American workers, we have got to strike a balance, a balance that will 
work for employers and those who would be there to provide advice.
  Now, we are hearing an awful lot of criticism about people who sell 
products and the fact that under this bill they would be able to give 
advice after they have disclosed any potential conflicts, after they 
have disclosed their fees, and with other protections.
  Now, what they really want to do is, they want to eliminate this 
sector from being able to give advice. These are the most respected 
investment firms in the country, with the best track record of 
investment advice in the country, that we would want to shove out of 
this market and prevent these people from giving their expertise and 
advice to the American workers. I just do not think that that makes any 
sense in the marketplace we are in. And so I think if we all step back 
and look at where we are trying to go, I have worked with Members on 
both sides of the aisle trying to craft a proper set of balances.

                              {time}  1245

  And in the debate today, the gentleman from North Dakota (Mr. 
Pomeroy) and I came to an agreement to add additional protections to 
this bill that I do think will protect American workers more without 
hindering the ability of employers or their agents to provide the kind 
of investment advice that American workers so sorely need and want 
today.
  So I would ask my colleagues, as we continue to move this process 
along, that we continue to work together to try to find the right 
balance, because, as we know, the action in the House today will not be 
the end of the process. It is actually the beginning of the process. 
This bill will have to go through the Senate, and I am confident that 
we will be able to continue to move this in a strong bipartisan manner.
  I ask all of my colleagues today to support the underlying bill and 
do what we can to help American workers increase their retirement 
security.
  Mr. STARK. Mr. Speaker, I oppose H.R. 2269, the falsely named 
Retirement Security Advice Act of 2001, introduced by Representative 
Boehner. The bill not only neglects to provide any type of security for 
workers' retirement, but it actually puts worker retirement plans at 
greater risk for fraudulent activity.
  Workers need independent financial advice, not advice plagued by 
self-interest. Current pension law ensures that those who manage or 
administer assets of a pension plan cannot engage in any transaction 
under the plan in which they have a financial or other conflict of 
interest. These rules, known as the prohibited transaction rules, are 
designed to ensure that the best interest of the investor is 
maintained. When these rules are eliminated, as H.R. 2269 calls for, 
the integrity of the pension system is threatened by fraud and abuse.
  For example, one of our nation's premier investment companies, 
Prudential, in 1996, agreed to pay at least $410 million in restitution 
and fines to compensate investors who suffered losses to fraud as far 
back as 1980. Many Wall Street brokerage firms sold limited 
partnerships in the 1980's to customers seeking tax deductions and the 
potential for profit from asset appreciation. However, these 
investments were typically suitable only for wealthy investors because 
of their speculative nature. Prudential made nearly $1 billion in 
commissions and fees from the sale of its partnerships. In addition to 
the limited partnership claims, widespread securities law violations 
were made at various Prudential branches across the country. These 
practices included:
  Lying about risk--Selling risky real estate and energy partnerships 
to pension funds, retirees and other individual investors who were told 
their investments were safe.
  Lying about return--Publishing promotional material that misled 
investors about the return they could expect on their money.
  Turning a blind eye to a subsidiary--Inadequately supervising the 
subsidiary that advertised and sold the partnerships.
  Turning a blind eye to employees--Inadequately supervising employees 
in nine branch offices, whose fraudulent practices resulted in losses 
of hundreds of thousands of dollars from customers.
  Churning--Trading excessively without authorization in clients' 
accounts to increase brokers' commissions.
  The settlement affected 8 million investors in every state, the 
District of Columbia and Puerto Rico. Many of the investors were 
elderly and faced the risk of not being compensated in their lifetime.
  Workers should have access to investment advice they can be certain 
is neither influenced by corporate profit motives or driven by a 
company's need to unload undesirable financial products. H.R. 2269 
undermines that certainty by permitting advisors to provide plan 
participants with self-interested advice regarding the investment 
options under the plan, as well as asset allocation. Under H.R. 2269, 
both financially sophisticated and financially inexperienced workers 
would lose access to independent investment advice under their 401(k) 
plans. Clearly, this provides less security than employees currently 
receive and has the potential for fraudulent activity that would be 
virtually impossible to remedy under our judicial system.
  The fraudulent Prudential activity illustrates the need for unbiased, 
independent investment advice for employees. We cannot allow

[[Page H8205]]

motivation and campaign contributions from the securities, banking and 
insurance industry to imperil the pensions of 42 million workers who 
participate in self-directed pension plans. It is easy to see who will 
benefit from this bill when organizations like Prudential and Citigroup 
support the bill and organizations that oppose it include AARP and the 
AFL-CIO.
  Workers won't get the critical independent advice from the Boehner 
bill, but they will from the Democratic substitute bill. The Democratic 
substitute bill requires that if a conflict of interest exists, that 
the investment advisor would be required to provide additional 
independent advice at no additional charge to the investor. If 
Prudential is going to make a greater profit by advising the investor 
to invest in Prudential funds, then an independent advisor with no such 
direct profit interest, must be available to either validate 
Prudential's advice or provide alternative advice to give the employee 
a less biased opinion.
  The debate is clear. The bill before us will hurt the retirement of 
millions of workers, but it will increase profits for investment 
advisors and investment companies. I urge my colleagues to vote for the 
Democratic substitute bill and vote no on H.R. 2269.
  Mr. CARDIN. Mr. Speaker, over the past twenty years, this country has 
witnessed a revolution in the way American workers save for their 
retirement. The central feature of this revolution has been the shift 
from defined benefit to defined contribution plans, and, in particular, 
the explosion in the growth of 401(k) plans. Through employer-sponsored 
401(k) plans, tens of millions of middle class Americans have entered 
the investment class, many of them encountering their first exposure to 
the workings of the stock markets.
  This trend has important implications with respect to the retirement 
security of these workers. Under the defined benefit model, the risk 
and responsibility for making prudent investments rests with the 
employer. At the end of the day, the employer is on the hook to provide 
the promised benefits. Should the employer fail to meet this 
obligation, the federal government, through the Pension Benefit 
Guaranty Corporation, provides added protection to make sure those 
benefits will be there when workers retire.
  In the 401(k) world, however, the risk and the responsibility rest 
with the worker. Individual investment choices and decisions can make a 
huge difference in terms of the size of the retirement nest egg that a 
worker accumulates. For many workers, this reality leads to one very 
basic question: ``Where should I put my money?''
  This bill recognizes the need to provide workers with a responsible, 
reliable answer to that question. I commend the gentleman from Ohio, 
the Chairman of the Education and the Workforce Committee, for his 
leadership on this issue. He has recognized that the need for 
retirement investment advice for America's workers is great, and 
deserves our thanks for bringing this issue to the fore.
  The bill does two things to make it more possible for workers to get 
investment advice. First, it provides liability relief for employers. 
Currently, surveys of employers tell us that a major impediment to 
employers retaining investment advice firms for their employees is the 
concern that they, the employer, will ultimately be held responsible 
for the specific advice provided. The bill before the House says that 
if the employer exercises prudence in selecting the adviser, he or she 
will not be subject to liability for the advice provided. This is a 
good, sensible reform, and I support it.
  The second issue addressed by the bill goes to the current 
restrictions within ERISA dealing with ``prohibited transactions.'' 
ERISA contains important protections that prevent investment advisers 
from advising plan participants to invest in products where the adviser 
has a conflict of interest. It is a sensible protection, and one that 
should only be lifted with great care.
  The bill before us does not, in my judgment, provide satisfactory 
protections for workers faced with investment advisers providing 
conflicted advice. The bill will require advisers to disclose that they 
are in a position to make money on the advice they are offering. That 
is an important provision, and the disclosure provisions were 
strengthened by the amendment presented by the Chairman of the Ways and 
Means Committee.
  But disclosure of the conflict by itself is not enough. Workers need 
to know more than that the person sitting in front of them will make 
money if their advice is followed. They need to have a full range of 
investment options. They need to know the range of fees that are 
charged for different types of investments, and how those fees will 
affect their long-term returns.
  In short, this bill does not provide any assurance or requirement 
that workers will have the information they need to make prudent 
investment decisions. On the other hand, at the end of this debate, we 
will have a substitute that attempts to address these problems. I 
certainly commend the gentleman from New Jersey for his work on this 
issue and for his long-standing commitment to expanding retirement 
savings opportunities for American workers. But I am concerned that the 
substitute imposes requirements that will make it unlikely that 
employers will take the necessary first step of providing investment 
advice to their workers.
  Mr. Speaker, America's workers need investment advice on their 
retirement savings accounts. Unfortunately, today we have two choices. 
The Republican bill takes the position that bad advice is better than 
no advice, and the substitute takes the position that no advice is 
better than bad advice. The right answer, of course, is that what the 
42 million Americans who participate in a 401(k) account need is not 
bad advice, or no advice, but good advice. We need to put together a 
bill that will give employers, workers, and the investment community 
the chance to get that job done.
  Mr. CRANE. Mr. Speaker, I rise in strong support of the Retirement 
Security Advice Act of 2001. As a cosponsor of this legislation, I 
would like to commend Mr. Johnson of Texas, Chairman Thomas, and 
Chairman Boehner for crafting common sense legislation that will help 
millions of hard-working Americans plan more wisely for their 
retirement.
  Mr. Speaker, while ERISA law is quite complicated, this legislation 
is quite simple. It allows employers to provide their workers with 
access to professional investment advice as long as the investment 
advisers fully disclose their fees and any potential conflicts. At the 
same time, it establishes significant safeguards to ensure that these 
workers receive advice that is solely in their best interests.
  Under current law, employers are discouraged from providing this 
service because employers may be held liable for specific advice that 
is provided to their employees. H.R. 2269 removes the barrier to 
employers contracting with advice providers and their workers by 
clarifying that employers are not responsible for the individual advice 
given by professional advisers to individual participants.
  Under this legislation, investment advice may only be offered by 
``fiduciary advisors''--qualified entities that are already fully 
regulated under other federal and state laws, such as registered 
investment advisers, registered broker dealers, insurance companies, 
and banks. Existing federal and state laws that regulate individual 
industries will continue to apply. Moreover, employers will remain 
responsible under ERISA fiduciary rules for the prudent selection and 
periodic review of any investment advisor.
  I urge my colleagues to support H.R. 2269 as amended by the rule.
  Mr. BOEHNER. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. LaHood). All time for general debate on 
this bill has expired.


     Amendment in the Nature of a Substitute Offered by Mr. Andrews

  Mr. ANDREWS. Mr. Speaker, as the designee of the gentleman from 
California (Mr. George Miller), I offer an amendment in the nature of a 
substitute.
  The text of the amendment in the nature of a substitute is as 
follows:

       Amendment in the nature of a substitute printed in part B 
     of House Report 107-289 offered by Mr. Andrews:
       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Retirement Security Advice 
     Act of 2001''.

     SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
                   INVESTMENT ADVICE.

       (a) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--Subsection (d) of section 4975 of the 
     Internal Revenue Code of 1986 (relating to exemptions from 
     tax on prohibited transactions) is amended by striking ``or'' 
     at the end of paragraph (14), by striking the period at the 
     end of paragraph (15) and inserting ``; or''; and by adding 
     at the end the following new paragraph:
       ``(16) any transaction described in subsection (f)(7)(A) in 
     connection with the provision of investment advice described 
     in subsection (e)(3)(B), in any case in which--
       ``(A) the plan provides for individual accounts and permits 
     a participant or beneficiary to exercise control over assets 
     in his or her account,
       ``(B) the advice is qualified investment advice provided to 
     a participant or beneficiary of the plan by a fiduciary 
     adviser in connection with any sale, acquisition, or holding 
     of a security or other property for purposes of investment of 
     plan assets, and
       ``(C) the requirements of subsection (f)(7)(B) are met in 
     connection with each instance of the provision of the 
     advice.''.
       (2) Rules relating to Investment advice provided by 
     fiduciary advisers.--Subsection (f) of section 4975 of such 
     Code (relating to other definitions and special rules) is 
     amended by adding at the end the following new paragraph:
       ``(7) Investment advice provided by fiduciary advisers.--

[[Page H8206]]

       ``(A) Allowable transactions.--The transactions described 
     in this subsection, in connection with the provision of 
     investment advice by a fiduciary adviser, are the following:
       ``(i) the provision of the advice to the participant or 
     beneficiary;
       ``(ii) the sale, acquisition, or holding of a security or 
     other property (including any lending of money or other 
     extension of credit associated with the sale, acquisition, or 
     holding of a security or other property) pursuant to the 
     advice; and
       ``(iii) the direct or indirect receipt of fees or other 
     compensation by the fiduciary adviser or an affiliate thereof 
     (or any employee, agent, or registered representative of the 
     fiduciary adviser or affiliate) in connection with the 
     provision of the advice.
       ``(B) Requirements for exemption from prohibited 
     transactions with respect to provision of investment 
     advice.--The requirements of this subparagraph are met in 
     connection with the provision of qualified investment advice 
     provided to a participant or beneficiary of an employee 
     benefit plan by a fiduciary adviser with respect to the plan 
     in connection with any sale, acquisition, or holding of a 
     security or other property for purposes of investment of 
     amounts held by the plan, if the requirements of the 
     following clauses are met:
       ``(i) Written or electronic disclosures.--At a time 
     contemporaneous with the provision of the advice in 
     connection with the sale, acquisition, or holding of the 
     security or other property, the fiduciary adviser shall 
     provide to the recipient of the advice a clear and 
     conspicuous notification, written (or by electronic means) in 
     a manner to be reasonably understood by the average plan 
     participant pursuant to regulations which shall be prescribed 
     by the Secretary (including mathematical examples), of the 
     following:

       ``(I) Interests held by the fiduciary adviser.--Any 
     interest of the fiduciary adviser in, or any affiliation or 
     contractual relationship of the fiduciary adviser (or 
     affiliates thereof) with any third party having an interest 
     in, the security or other property.
       ``(II) Related fees or compensation in connection with the 
     provision of the advice.--All fees or other compensation 
     relating to the advice (including fees or other compensation 
     itemized with respect to each security or other property with 
     respect to which the advice is provided) that the fiduciary 
     adviser (or any affiliate thereof) is to receive (including 
     compensation provided by any third party) in connection with 
     the provision of the advice or in connection with the sale, 
     acquisition, or holding of the security or other property.
       ``(III) Ongoing fees or compensation in connection with the 
     security or property involved.--All fees or other 
     compensation that the fiduciary adviser (or any affiliate 
     thereof) is to receive, on an ongoing basis, in connection 
     with any security or other property with respect to which the 
     fiduciary adviser gives the advice.
       ``(IV) Applicable limitations on scope of advice.--Any 
     limitation placed (in accordance with the requirements of 
     this subsection) on the scope of the advice to be provided by 
     the fiduciary adviser with respect to the sale, acquisition, 
     or holding of the security or other property.
       ``(V) Types of services generally offered.--The types of 
     services offered by the fiduciary adviser in connection with 
     the provision of qualified investment advice by the fiduciary 
     adviser.
       ``(VI) Fiduciary status of the fiduciary adviser.--That the 
     fiduciary advisor is a fiduciary of the plan.

       ``(ii) Disclosure by fiduciary adviser in accordance with 
     applicable securities laws.--The fiduciary adviser shall 
     provide appropriate disclosure, in connection with the sale, 
     acquisition, or holding of the security or other property, in 
     accordance with all applicable securities laws.
       ``(iii) Transaction occurring solely at direction of 
     recipient of advice.--The sale, acquisition, or holding of 
     the security or other property shall occur solely at the 
     direction of the recipient of the advice.
       ``(iv) Reasonable compensation.--The compensation received 
     by the fiduciary adviser and affiliates thereof in connection 
     with the sale, acquisition, or holding of the security or 
     other property shall be reasonable.
       ``(v) Arm's length transaction.--The terms of the sale, 
     acquisition, or holding of the security or other property 
     shall be at least as favorable to the plan as an arm's length 
     transaction would be.
       ``(C) Continued availability of information for at least 1 
     year.--The requirements of subparagraph (B)(i) shall be 
     deemed not to have been met in connection with the initial or 
     any subsequent provision of advice described in subparagraph 
     (B) if, at any time during the 1-year period following the 
     provision of the advice, the fiduciary adviser fails to 
     maintain the information described in subclauses (I) through 
     (IV) of subparagraph (B)(i) in currently accurate form or to 
     make the information available, upon request and without 
     charge, to the recipient of the advice.
       ``(D) Evidence of compliance maintained for at least 6 
     years.--A fiduciary adviser referred to in subparagraph (B) 
     who has provided advice referred to in such subparagraph 
     shall, for a period of not less than 6 years after the 
     provision of the advice, maintain any records necessary for 
     determining whether the requirements of the preceding 
     provisions of this paragraph and of subsection (d)(16) have 
     been met. A transaction prohibited under subsection (c)(1) 
     shall not be considered to have occurred solely because the 
     records are lost or destroyed prior to the end of the 6-year 
     period due to circumstances beyond the control of the 
     fiduciary adviser.
       ``(E) Model disclosure forms.--The Secretary shall 
     prescribe regulations setting forth model disclosure forms to 
     assist fiduciary advisers in complying with the disclosure 
     requirements of under this paragraph.
       ``(F) Annual reviews by the Secretary.--The Secretary shall 
     conduct annual reviews of randomly selected fiduciary 
     advisers providing qualified investment advice to 
     participants and beneficiaries. In the case of each review, 
     the Secretary shall review the following:
       ``(i) Compliance by advice computer models with reasonable 
     investment methodologies.--The extent to which advice 
     computer models employed by the fiduciary adviser comply with 
     reasonable investment methodologies.
       ``(ii) Compliance with disclosure requirements.--The extent 
     to which disclosures provided by the fiduciary adviser have 
     complied with the requirements of this subsection.
       ``(iii) Extent of violations.--The extent to which any 
     violations of fiduciary duties have occurred in connection 
     with the provision of the advice.
       ``(iv) Extent of reported complaints.--The extent to which 
     complaints to relevant agencies have been made in connection 
     with the provision of the advice.
     Any proprietary information obtained by the Secretary shall 
     be treated as confidential.
       ``(G) Duty of conflicted fiduciary adviser to provide for 
     alternative independent advice.--
       ``(i) In general.--In connection with any qualified 
     investment advice provided by a fiduciary adviser to a 
     participant or beneficiary regarding any security or other 
     property, if the fiduciary adviser--

       ``(I) has an interest in the security or other property, or
       ``(II) has an affiliation or contractual relationship with 
     any third party that has an interest in the security or other 
     property,

     the requirements of subparagraph (B) shall be treated as not 
     met in connection with the advice unless the fiduciary 
     adviser has arranged, as an alternative to the advice that 
     would otherwise be provided by the fiduciary advisor, for 
     qualified investment advice with respect to the security or 
     other property provided by at least one alternative 
     investment adviser meeting the requirements of clause (ii).
       ``(ii) Independence and qualifications of alternative 
     investment adviser.--Any alternative investment adviser whose 
     qualified investment advice is arranged for by a fiduciary 
     adviser pursuant to clause (i)--

       ``(I) shall have no material interest in, and no material 
     affiliation or contractual relationship with any third party 
     having a material interest in, the security or other property 
     with respect to which the investment adviser is providing the 
     advice, and
       ``(II) shall meet the requirements of a fiduciary adviser 
     under subparagraph (H)(ii) and (iii), except that an 
     alternative investment adviser may not be a fiduciary of the 
     plan other than in connection with the provision of the 
     advice.

       ``(iii) Scope and fees of alternative investment advice.--
     Any qualified investment advice provided pursuant to this 
     subparagraph by an alternative investment adviser shall be of 
     the same type and scope, and provided under the same terms 
     and conditions (including no additional charge to the 
     participant or beneficiary), as apply with respect to the 
     qualified investment advice to be provided by the fiduciary 
     adviser.
       ``(H) Fiduciary adviser defined.--For purposes of this 
     paragraph and subsection (d)(16)--
       ``(i) In general.--The term `fiduciary adviser' means, with 
     respect to a plan, a person who--

       ``(I) is a fiduciary of the plan by reason of the provision 
     of qualified investment advice by such person to a 
     participant or beneficiary,
       ``(II) meets the qualifications of clause (ii), and
       ``(III) meets the additional requirements of clause (iii).

       ``(ii) Qualifications.--A person meets the qualifications 
     of this clause if such person--

       ``(I) is registered as an investment adviser under the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),
       ``(II) if not registered as an investment adviser under 
     such Act by reason of section 203A(a)(1) of such Act (15 
     U.S.C. 80b-3a(a)(1)), is registered under the laws of the 
     State in which the fiduciary 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,
       ``(III) is registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(IV) is a bank or similar financial institution referred 
     to in subsection (d)(4),
       ``(V) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(VI) is any other comparable qualified entity which 
     satisfies such criteria as the Secretary determines 
     appropriate consistent with the purpose of this subsection.

[[Page H8207]]

       ``(iii) Additional requirements with respect to certain 
     employees or other agents of certain advisers.--A person 
     meets the additional requirements of this clause if every 
     individual who is employed (or otherwise compensated) by such 
     person and whose scope of duties includes the provision of 
     qualified investment advice on behalf of such person to any 
     participant or beneficiary is--

       ``(I) a registered representative of such person,
       ``(II) an individual described in subclause (I), (II), or 
     (III) of clause (ii), or
       ``(III) such other comparable qualified individual who 
     satisfies such criteria as the Secretary determines 
     appropriate consistent with the purpose of this subsection.

       ``(I) Additional definitions.--For purposes of this 
     paragraph and subsection (d)(16)--
       ``(i) Qualified investment advice.--The term `qualified 
     investment advice' means, in connection with a participant or 
     beneficiary, investment advice referred to in subsection 
     (e)(3)(B) which--

       ``(I) consists of an individualized recommendation to the 
     participant or beneficiary with respect to the purchase, 
     sale, or retention of securities or other property for the 
     individual account of the participant or beneficiary, in 
     accordance with generally accepted investment management 
     principles, and
       ``(II) takes into account all investment options under the 
     plan.

       ``(ii) Registered representative.--The term `registered 
     representative' of another entity means a person described in 
     section 3(a)(18) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(18)) (substituting such entity for the broker 
     or dealer referred to in such section) or a person described 
     in section 202(a)(17) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)(17)) (substituting such entity for the 
     investment adviser referred to in such section).''.
       (3) Assumption of liability.--Subsection (b) of section 
     4975 of such Code is amended--
       (A) by striking ``Person.--In'' and inserting ``Person.--
       ``(1) In general.--In'', and moving the text 2 ems to the 
     right, and
       (B) by adding at the end the following new paragraph:
       ``(2) Assumption of liability.--If a court determines that 
     a fiduciary advisor has breached his fiduciary responsibility 
     as a result of a failure to meet the requirements of 
     subparagraph (B), (C), (D), or (G) of subsection (e)(7), 
     then, notwithstanding any other provision of this title or 
     the Employee Retirement Income Security Act of 1974, the 
     fiduciary advisor shall be liable for any monetary losses 
     suffered by a participant or beneficiary as a result of such 
     breach.''.
       (b) Amendments to the Employee Retirement Income Security 
     Act of 1974.--
       (1) In general.--Section 408(b) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1108(b)) is amended by 
     adding at the end the following new paragraph:
       ``(14)(A) Any transaction described in subparagraph (B) in 
     connection with the provision of investment advice described 
     in section 3(21)(A)(ii), in any case in which--
       ``(i) the plan provides for individual accounts and permits 
     a participant or beneficiary to exercise control over assets 
     in his or her account,
       ``(ii) the advice is qualified investment advice provided 
     to a participant or beneficiary of the plan by a fiduciary 
     adviser in connection with any sale, acquisition, or holding 
     of a security or other property for purposes of investment of 
     plan assets, and
       ``(iii) the requirements of subsection (g) are met in 
     connection with each instance of the provision of the advice.
       ``(B) The transactions described in this subparagraph are 
     the following:
       ``(i) the provision of the advice to the participant or 
     beneficiary;
       ``(ii) the sale, acquisition, or holding of a security or 
     other property (including any lending of money or other 
     extension of credit associated with the sale, acquisition, or 
     holding of a security or other property) pursuant to the 
     advice; and
       ``(iii) the direct or indirect receipt of fees or other 
     compensation by the fiduciary adviser or an affiliate thereof 
     (or any employee, agent, or registered representative of the 
     fiduciary adviser or affiliate) in connection with the 
     provision of the advice.''.
       (2) Requirements.--Section 408 of such Act is amended 
     further by adding at the end the following new subsection:
       ``(g) Requirements for Exemption from Prohibited 
     Transactions with Respect to Provision of Investment 
     Advice.--
       ``(1) In general.--The requirements of this subsection are 
     met in connection with the provision of qualified investment 
     advice provided to a participant or beneficiary of an 
     employee benefit plan by a fiduciary adviser with respect to 
     the plan in connection with any sale, acquisition, or holding 
     of a security or other property for purposes of investment of 
     amounts held by the plan, if the requirements of the 
     following subparagraphs are met:
       ``(A) Written disclosures.--At a time contemporaneous with 
     the provision of the advice in connection with the sale, 
     acquisition, or holding of the security or other property, 
     the fiduciary adviser shall provide to the recipient of the 
     advice a clear and conspicuous notification, written in a 
     manner to be reasonably understood by the average plan 
     participant pursuant to regulations which shall be prescribed 
     by the Secretary (including mathematical examples), of the 
     following:
       ``(i) Interests held by the fiduciary adviser.--Any 
     interest of the fiduciary adviser in, or any affiliation or 
     contractual relationship of the fiduciary adviser (or 
     affiliates thereof) with any third party having an interest 
     in, the security or other property.
       ``(ii) Related fees or compensation in connection with the 
     provision of the advice.--All fees or other compensation 
     relating to the advice (including fees or other compensation 
     itemized with respect to each security or other property with 
     respect to which the advice is provided) that the fiduciary 
     adviser (or any affiliate thereof) is to receive (including 
     compensation provided by any third party) in connection with 
     the provision of the advice or in connection with the sale, 
     acquisition, or holding of the security or other property.
       ``(iii) Ongoing fees or compensation in connection with the 
     security or property involved.--All fees or other 
     compensation that the fiduciary adviser (or any affiliate 
     thereof) is to receive, on an ongoing basis, in connection 
     with any security or other property with respect to which the 
     fiduciary adviser gives the advice.
       ``(iv) Applicable limitations on scope of advice.--Any 
     limitation placed (in accordance with the requirements of 
     this subsection) on the scope of the advice to be provided by 
     the fiduciary adviser with respect to the sale, acquisition, 
     or holding of the security or other property.
       ``(v) Types of services generally offered.--The types of 
     services offered by the fiduciary adviser in connection with 
     the provision of qualified investment advice by the fiduciary 
     adviser.
       ``(vi) Fiduciary status of the fiduciary adviser.--That the 
     fiduciary advisor is a fiduciary of the plan.
       ``(B) Disclosure by fiduciary adviser in accordance with 
     applicable securities laws.--The fiduciary adviser shall 
     provide appropriate disclosure, in connection with any the 
     sale, acquisition, or holding of the security or other 
     property, in accordance with all applicable securities laws.
       ``(C) Transaction occurring solely at direction of 
     recipient of advice.--The sale, acquisition, or holding of 
     the security or other property shall occur solely at the 
     direction of the recipient of the advice.
       ``(D) Reasonable compensation.--The compensation received 
     by the fiduciary adviser and affiliates thereof in connection 
     with the sale, acquisition, or holding of the security or 
     other property shall be reasonable.
       ``(E) Arm's length transaction.--The terms of the sale, 
     acquisition, or holding of the security or other property 
     shall be at least as favorable to the plan as an arm's length 
     transaction would be.
       ``(2) Continued availability of information for at least 1 
     year.--The requirements of paragraph (1)(A) shall be deemed 
     not to have been met in connection with the initial or any 
     subsequent provision of advice described in paragraph (1) if, 
     at any time during the 1-year period following the provision 
     of the advice, the fiduciary adviser fails to maintain the 
     information described in clauses (i) through (iv) of 
     subparagraph (A) in currently accurate form or to make the 
     information available, upon request and without charge, to 
     the recipient of the advice.
       ``(3) Evidence of compliance maintained for at least 6 
     years.--A fiduciary adviser referred to in paragraph (1) who 
     has provided advice referred to in such paragraph shall, for 
     a period of not less than 6 years after the provision of the 
     advice, maintain any records necessary for determining 
     whether the requirements of the preceding provisions of this 
     subsection and of subsection (b)(14) have been met. A 
     transaction prohibited under section 406 shall not be 
     considered to have occurred solely because the records are 
     lost or destroyed prior to the end of the 6-year period due 
     to circumstances beyond the control of the fiduciary adviser.
       ``(4) Model disclosure forms.--The Secretary shall 
     prescribe regulations setting forth model disclosure forms to 
     assist fiduciary advisers in complying with the disclosure 
     requirements of under this subsection.
       ``(5) Exemption for employers contracting for qualified 
     investment advice.--
       ``(A) Reliance on contractual arrangements.--Subject to 
     subparagraph (B), a plan sponsor or other person who is a 
     fiduciary (other than a fiduciary adviser) shall not be 
     treated as failing to meet the requirements of this part 
     solely by reason of the provision of qualified investment 
     advice (or solely by reason of contracting for or otherwise 
     arranging for the provision of the investment advice), if--
       ``(i) the advice is provided by a fiduciary adviser 
     pursuant to an arrangement between the plan sponsor or other 
     fiduciary and the fiduciary adviser for the provision by the 
     fiduciary adviser of qualified investment advice, and
       ``(ii) the terms of the arrangement require compliance by 
     the fiduciary adviser with the requirements of this 
     subsection.
       ``(B) Continued duty for employer to prudently select and 
     review fiduciary advisers.--Nothing in subparagraph (A) shall 
     be construed to exempt a plan sponsor or other person who is 
     a fiduciary from any requirement of this part for the prudent 
     selection and periodic review of a fiduciary adviser with 
     whom the plan sponsor or other person enters into an 
     arrangement for the

[[Page H8208]]

     provision of qualified investment advice. The plan sponsor or 
     other person who is a fiduciary shall not be liable under 
     this part with respect to the specific qualified investment 
     advice given by the fiduciary adviser to any particular 
     recipient of the advice. Pursuant to regulations which shall 
     be prescribed by the Secretary, the fiduciary adviser shall 
     provide appropriate disclosures to the plan sponsor to enable 
     the plan sponsor to fulfill its fiduciary responsibilities 
     under this part. In connection with the provision of the 
     advice by a fiduciary adviser on an ongoing basis, such 
     regulations shall provide for such disclosures on at least an 
     annual basis.
       ``(C) Plan assets may be used to pay reasonable expenses.--
     Nothing in this part shall be construed to preclude the use 
     of plan assets to pay for reasonable expenses in providing 
     qualified investment advice.
       ``(6) Annual reviews by the Secretary.--The Secretary shall 
     conduct annual reviews of randomly selected fiduciary 
     advisers providing qualified investment advice to 
     participants and beneficiaries. In the case of each review, 
     the Secretary shall review the following:
       ``(A) Compliance by advice computer models with generally 
     accepted investment management principles.--The extent to 
     which advice computer models employed by the fiduciary 
     adviser comply with generally accepted investment management 
     principles.
       ``(B) Compliance with disclosure requirements.--The extent 
     to which disclosures provided by the fiduciary adviser have 
     complied with the requirements of this subsection.
       ``(C) Extent of violations.--The extent to which any 
     violations of fiduciary duties have occurred in connection 
     with the provision of the advice.
       ``(D) Extent of reported complaints.--The extent to which 
     complaints to relevant agencies have been made in connection 
     with the provision of the advice.
     Any proprietary information obtained by the Secretary shall 
     be treated as confidential.
       ``(7) Duty of conflicted fiduciary adviser to provide for 
     alternative independent advice.--
       ``(A) In general.--In connection with any qualified 
     investment advice provided by a fiduciary adviser to a 
     participant or beneficiary regarding any security or other 
     property, if the fiduciary adviser--
       ``(i) has an interest in the security or other property, or
       ``(ii) has an affiliation or contractual relationship with 
     any third party that has an interest in the security or other 
     property,
     the requirements of paragraph (1) shall be treated as not met 
     in connection with the advice unless the fiduciary adviser 
     has arranged, as an alternative to the advice that would 
     otherwise be provided by the fiduciary advisor, for qualified 
     investment advice with respect to the security or other 
     property provided by at least one alternative investment 
     adviser meeting the requirements of subparagraph (B).
       ``(B) Independence and qualifications of alternative 
     investment adviser.--Any alternative investment adviser whose 
     qualified investment advice is arranged for by a fiduciary 
     adviser pursuant to subparagraph (A)--
       ``(i) shall have no material interest in, and no material 
     affiliation or contractual relationship with any third party 
     having a material interest in, the security or other property 
     with respect to which the investment adviser is providing the 
     advice, and
       ``(ii) shall meet the requirements of a fiduciary adviser 
     under paragraph (7)(A), except that an alternative investment 
     adviser may not be a fiduciary of the plan other than in 
     connection with the provision of the advice.
       ``(C) Scope and fees of alternative investment advice.--Any 
     qualified investment advice provided pursuant to this 
     paragraph by an alternative investment adviser shall be of 
     the same type and scope, and provided under the same terms 
     and conditions (including no additional charge to the 
     participant or beneficiary), as apply with respect to the 
     qualified investment advice to be provided by the fiduciary 
     adviser.
       ``(8) Fiduciary adviser defined.--For purposes of this 
     subsection and subsection (b)(14)--
       ``(A) In general.--The term `fiduciary adviser' means, with 
     respect to a plan, a person--
       ``(i) who is a fiduciary of the plan by reason of the 
     provision of qualified investment advice by such person to a 
     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) if not registered as an investment adviser under 
     such Act by reason of section 203A(a)(1) of such Act (15 
     U.S.C. 80b-3a(a)(1)), is registered under the laws of the 
     State in which the fiduciary 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,
       ``(III) is registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(IV) is a bank or similar financial institution referred 
     to in section 408(b)(4),
       ``(V) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(VI) is any other comparable entity which satisfies such 
     criteria as the Secretary determines appropriate, and

       ``(iii) who is an entity meeting the requirements of 
     subparagraph (B).
       ``(B) Additional requirements with respect to certain 
     employees or other agents of certain advisers.--The 
     requirements of this subparagraph are met if every individual 
     who is employed (or otherwise compensated) by a person 
     described subparagraph (A)(ii) and whose scope of duties 
     includes the provision of qualified investment advice on 
     behalf of such person to any participant or beneficiary is--
       ``(i) a registered representative of such person,
       ``(ii) an individual described in subclause (I), (II), or 
     (III) of subparagraph (A)(ii), or
       ``(iii) such other comparable qualified individual as may 
     be designated in regulations of the Secretary.
       ``(9) Additional definitions.--For purposes of this 
     subsection and subsection (b)(14)--
       ``(A) Qualified investment advice.--The term `qualified 
     investment advice' means, in connection with a participant or 
     beneficiary, investment advice referred to in section 
     3(21)(A)(ii) which--
       ``(i) consists of an individualized recommendation to the 
     participant or beneficiary with respect to the purchase, 
     sale, or retention of securities or other property for the 
     individual account of the participant or beneficiary, in 
     accordance with generally accepted investment management 
     principles, and
       ``(ii) takes into account all investment options under the 
     plan.
       ``(B) Affiliate.--The term `affiliate' of another entity 
     means an affiliated person of such entity (as defined in 
     section 2(a)(3) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)(3))).
       ``(C) Registered representative.--The term `registered 
     representative' of another entity means a person described in 
     section 3(a)(18) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(18)) (substituting such entity for the broker 
     or dealer referred to in such section) or a person described 
     in section 202(a)(17) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)(17)) (substituting such entity for the 
     investment adviser referred to in such section).''.
       (c) Enforcement.--
       (1) Liability for breach.--
       (A) Liability in connection with individual account 
     plans.--Section 409 of such Act (29 U.S.C. 1109) is amended 
     by adding at the end the following new subsection:
       ``(c)(1) In any case in which the provision by a fiduciary 
     adviser of qualified investment advice to a participant or 
     beneficiary regarding any security or other property consists 
     of a breach described in subsection (a), the fiduciary 
     adviser shall be personally liable to make good to the 
     individual account of the participant or beneficiary any 
     losses to the individual account resulting from the breach, 
     and to restore to the individual account any profits of the 
     fiduciary adviser which have been made through use of assets 
     of the individual account by--
       ``(A) the fiduciary adviser, or
       ``(B) any other party with respect to whom a material 
     affiliation or contractual relationship of the fiduciary 
     adviser resulted in a violation of section 408(g)(1)(A) in 
     connection with the advice.
       ``(2) In the case of any action under this title by a 
     participant or beneficiary against a fiduciary adviser for 
     relief under this subsection in connection with the provision 
     of any qualified investment advice--
       ``(A) if the participant or beneficiary shows that the 
     fiduciary adviser had any interest in, or had any affiliation 
     or contractual relationship with a third party having an 
     interest in, the security or other property, there shall be a 
     presumption (rebuttable by a preponderance of the evidence) 
     that the fiduciary adviser failed to meet the requirements of 
     subparagraphs (A) and (B) of section 404(a)(1) in connection 
     with the provision of the advice, and
       ``(B) the dispute may be settled by arbitration, but only 
     pursuant to terms and conditions established by agreement 
     entered into voluntarily by both parties after the 
     commencement of the dispute.
       ``(3) For purposes of this subsection, the terms `fiduciary 
     adviser' and `qualified investment advice' shall have the 
     meanings provided such terms in subparagraphs (A) and (B), 
     respectively, of section 406(g)(7).''.
       (B) Limitation on exemption from liability.--Section 404(c) 
     of such Act (29 U.S.C. 1104(c)) is amended--
       (i) by redesignating paragraph (2) as paragraph (3) (and by 
     adjusting the margination of such paragraph to full measure 
     and adjusting the margination of subparagraphs (A) through 
     (B) thereof accordingly); and
       (ii) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2)(A) In any case in which--
       ``(i) a participant or beneficiary exercises control over 
     the assets in his or her account by means of a sale, 
     acquisition, or holding of a security or other property with 
     regard to which qualified investment advice was provided by a 
     fiduciary adviser, and
       ``(ii) any transaction in connection with the exercise of 
     such control is not a prohibited transaction solely by reason 
     of section 408(b)(14),
     paragraph (1) shall not apply with respect to the fiduciary 
     adviser in connection with the provision of the advice.
       ``(B) For purposes of this subsection, the terms `fiduciary 
     adviser' and `qualified investment advice' shall have the 
     meanings provided such terms in subparagraphs (A) and (B), 
     respectively, of section 408(g)(7).''.

[[Page H8209]]

       (2) Attorney's fees.--Section 502(g) of such Act (29 U.S.C. 
     1132(g)) is amended--
       (A) in paragraph (1), by inserting ``or (3)'' after 
     ``paragraph (2)''; and
       (B) by adding at the end the following new paragraph:
       ``(3) In any action under this title by the participant or 
     beneficiary against a fiduciary adviser for relief under 
     section 409(c) in which the plaintiff prevails, the court 
     shall allow a reasonable attorney's fee and costs of action 
     to the prevailing plaintiff.''.
       (3) Applicability of state fraud laws.--Section 514(b) of 
     such Act (29 U.S.C. 1144(b)) is amended--
       (A) by redesignating paragraph (9) as paragraph (10); and
       (B) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Nothing in this title shall be construed to supersede 
     any State action for fraud against a fiduciary adviser for 
     any act or failure to act by the fiduciary adviser 
     constituting a violation of section 409(c).''.

     SEC. 3. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     advice referred to in section 3(21)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 or section 
     4975(e)(3)(B) of the Internal Revenue Code of 1986 provided 
     on or after January 1, 2002.

  The SPEAKER pro tempore. Pursuant to House Resolution 288, the 
gentleman from New Jersey (Mr. Andrews) and a Member opposed each will 
control 30 minutes.
  The Chair recognizes the gentleman from New Jersey (Mr. Andrews).
  Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this piece of legislation is about a person who is at 
the age of 30 or 40 in his or her life and starting to think about 
retirement, hopefully sooner than that, and they find they have a few 
thousand dollars in an account, in an IRA or a 401(k). They pick up the 
newspaper and they see wild fluctuations in the Dow Jones average, and 
they hear from some of their neighbors that they are doing great in 
their investments, and from others they are not doing so well; and they 
realize they need some help. They need some good sound advice as to 
what to do with this very crucial asset.
  Both sides of this debate agree that the present situation is not 
very good; that the advice does come from people who are like Bob at 
the coffee shop, the friend of the gentleman from Ohio (Mr. Boehner), 
someone who is not really qualified, that people get advice through 
hearsay, and we think something should be done about that. The proposal 
the gentleman from New York (Mr. Rangel) and myself are putting forward 
now, we think, is a more sensible way to address this need.
  We think that when this individual goes to get advice as to what to 
do with his or her money, that there ought to be some choices of the 
advisor. We do not rule out the prospect of an advisor who has an 
interest in a fund that he or she is advising about. We do say, though, 
that if such advice is going to be given, if the person giving the 
advice has a vested interest in our hypothetical investor putting his 
or her money in one fund as opposed to another, if there is a higher 
commission or some other gain that derives to that advisor, we say the 
following:
  Each time a decision is made by the investor as to what to do, the 
advisor has to tell the investor in plain language, in plain math, in 
an understandable way what the nature of the advisor's interest is. The 
advisor has to say to the investor, You know, if you put your money in 
fund A instead of fund B, I make a little more money than I otherwise 
would, and you ought to know that before you make the decision.
  Our substitute says that the person giving that advice must be 
qualified, and not most of the time but all of the time. The person 
giving the advice must have proper education. The person giving the 
advice must be part of a regulated industry, whether he or she is a 
broker or some other form of advisor. And if the person gives advice 
that is in violation of law, that is a violation of what we call the 
fiduciary duty, then the person must lose their license, and not most 
of the time, but all of the time, to make sure that the advisor is 
properly qualified.
  Our substitute says that there must be some mechanism so that when 
our investor goes to ask for advice, and the advice may be given by a 
conflicted advisor, by someone having an interest in one or more of the 
funds, the employee should also be told that there is at least one 
other choice; that if they do not want to take advice from this person 
who has an interest in some of the funds that he or she is advising 
about, there is somewhere else that individual can go, to a person who 
has no interest whatsoever in the advice that he or she is giving. At 
least one other option on the menu so that the investor knows that 
there is somewhere else to go.
  Finally, this substitute differs from the underlying bill because the 
substitute provides that if the advisor gives advice that is so bad 
that it is a violation of the law, so bad that it subverts and violates 
the fiduciary duty of that advisor, the investor can be made whole. He 
or she can get their pension money back, get back any lost profits or 
gains they would have had while they were waiting to get it back, and 
can get the cost of recovering those funds back in attorneys' fees as 
well. The investor does not have to wait for some bureaucracy in 
Washington to take action on his or her behalf; they do not have to 
hope that they can get represented in a case that is not worth very 
much money to an attorney, but worth an awful lot to them. They have 
the ability to be made whole.
  The proposal that the gentleman from New York and I are putting 
forward provides for more advice for people who need it, but it does so 
in a way that is careful and it does so in a way that does not subvert 
and discard the 27-year history of the ERISA statute that has provided 
safer pensions and sounder investments for our citizens.
  Mr. Speaker, I urge Members of both sides to consider this proposal, 
and I urge a ``yes'' vote on it.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. Does the gentleman from Ohio (Mr. Boehner) 
claim the time in opposition?
  Mr. BOEHNER. Mr. Speaker, I am opposed to the amendment, and I do so 
claim the time.
  The SPEAKER pro tempore. The gentleman from Ohio is recognized for 30 
minutes.
  Mr. BOEHNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I first want to thank the gentleman from New Jersey (Mr. 
Andrews) and the gentleman from New York (Mr. Rangel) for the serious 
and hard work they have brought to our debate today. The entire process 
has been marked by bipartisan respect, and I am glad to see that is 
continuing today. I look forward to working with both my friends as 
this process continues.
  Nonetheless, I must oppose their amendment because it falls into the 
trap of so overprotecting people from one set of dangers that, instead, 
we push them into another. If the Andrews-Rangel amendment were 
adopted, we could say that workers would never receive misleading or 
self-serving advice, but it is almost certain that they would not 
receive any advice at all. Despite my good friends' intentions, I 
believe the substitute would practically guarantee that no employers 
would provide investment advice at all to their workers.
  First, the substitute unnecessarily intrudes upon an extensive and 
effective regulatory regime that protects investors who are paying for 
advice with their own money outside of an ERISA plan. In addition to 
this regulatory scheme, which includes banking, securities, insurance 
laws, regulations, and agencies at the Federal and State levels, the 
substitute requires Department of Labor qualitative oversight on 
computer models of advice, the substantive qualifications of financial 
advisors, and the adequacy of disclosure forms. Now, this not only 
creates overlapping and confusing jurisdiction between the Department 
of Labor and the Securities and Exchange Commission, it adds additional 
and unnecessary regulations to existing securities laws.
  H.R. 2269, the underlying bill, seeks to reduce and streamline 
regulatory burdens on employers and financial advisors rather than to 
create additional rules and regulations. The new and unnecessary 
burdens created by the substitute will only drive up the cost of 
investment advice, discourage competition, and, in the end, mean that 
fewer numbers of American workers will ever get real investment advice.
  The substitute also requires that if investment advice is offered, 
two investment advisors must be offered to plan participants. Employers 
have told us that this simply will not work.

[[Page H8210]]

 When we are trying to make investment advice more accessible and 
affordable, I do not see any sense in driving up costs and compliance 
effort by, in effect, forcing employers to select and monitor two 
advisors instead of just one.
  Finally, the substitute creates huge problems with ERISA's remedy 
structure and would subject employers to a stream of unfair and costly 
lawsuits by reversing the burden of proof and dramatically increasing 
ERISA's already intimidating remedies provisions. The substitute also 
erodes ERISA's careful preemption which gives employers legal certainty 
and clarity amongst our 50 States.
  The underlying bill is meant to make very minor change to ERISA to 
allow employers to offer investment advice to their employees. H.R. 
2269 works within the existing ERISA structure to do this without 
affecting ERISA's important protections or modifying the flexibility 
that courts have to fashion appropriate remedies within ERISA.
  Amending ERISA's remedy structure will likely have unintended 
consequences on all ERISA claims. And before significantly changing 
ERISA's structure, we should look at the remedies offered in more 
detail. ERISA's current remedies structure permits courts to flexibly 
fashion appropriate remedies, including attorneys' fees, economic 
damages, disgorgement of profits, and banning advisors. Moreover, 
reversing the assumption of proof will not protect plan participants, 
but will only line the pockets of trial attorneys. So I urge my 
colleagues to vote against the substitutes for these reasons.
  Put yourself in the place of an employer. Why would you offer 
investment advice to your workers if your litigation risks were so high 
that you might lose your entire business? Or in the place of an 
advisor, why would you even try to enter the investment advice market 
when, by doing so, would subject yourself to 50 different standards of 
litigation, 50 States under a standard of proof that guarantees you 
costly litigation, even if you have done nothing wrong?
  H.R. 2269 effectively protects plan participants in a way that still 
makes employer-provided investment advice economically viable to 
employers and their employees. The fiduciary duty that it imposes on 
employers and advisers alike is the highest duty of loyalty in the law. 
Its disclosure requirements are actually more consumer friendly than 
the Andrews-Rangel substitute because it requires disclosure on an 
annual basis, or when there is a material change in disclosure. And it 
provides for the most vital consumer protection of all, a vibrant 
competitive marketplace, by opening the field to many of the most 
highly regarded investment advice firms in the country. The underlying 
bill reaches the right balance of increasing worker access to advice 
while safeguarding the interests of the American workers without 
discouraging employers from offering any advice at all.
  Mr. Speaker, the Andrews-Rangel substitute, I do not believe, will 
protect workers; and I do think it will discourage any employer from 
offering advice. This will not help workers that desperately need this 
kind of advice to try to increase their own retirement securities. So I 
urge my colleagues to oppose the substitute.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ANDREWS. Mr. Speaker, I yield myself 30 seconds.
  The liability provisions in this substitute do not impose new 
liability upon employers. What they do is impose new responsibility and 
liability upon advisors who breach their fiduciary duty.
  And the employer-protection provisions in this substitute are 
essentially identical to those in the underlying bill.
  Mr. Speaker, I yield 4 minutes to the gentleman from Washington (Mr. 
McDermott), a member of the Committee on Ways and Means.
  Mr. McDERMOTT. Mr. Speaker, I rise in support of the Andrews-Rangel 
substitute. I told a story earlier which sort of makes you wonder about 
why it is that the employee groups are not here saying this is such a 
good deal. Where is the AFL-CIO? Why are they not running in here? Why 
is the AARP not coming in here saying we want old folks to have this 
investment? Because the bill is not a good one, that is why.
  Now, the substitute that has been offered, really deals with the four 
issues that we need to deal with: one is the disclosure of conflicts, 
and that has to be done in a way that people actually hear it and know 
what is going on. Under the disclosure requirements contained in this 
substitute, plan participants or beneficiaries under the plan would 
receive adequate disclosure of fees and other compensation that would 
be received by the advisor with respect to the product being 
recommended.

                              {time}  1300

  So they would know at the time they are getting this pitch, who is 
doing what.
  Secondly, the qualification of advisors. We hear a lot of talk about 
banks are regulated. Yes, banks are regulated. But the fact is that 
under the Investors' Advisors Act, that is, the Federal law that 
controls advisors on money, banks are exempted. So all this talk about 
banks are regulated, blah, blah, blah, but not in this area. Our 
substitute closes that loophole.
  Now, the ability to get some nonconflicted advice, investors should 
be able to have at least two, one that is selling something and someone 
who is not selling something.
  The fourth area is the question of remedies. If someone sells us 
something, and most Americans do not know what is going on in the stock 
market, if somebody says this is the thing to buy, and they know that 
it is about to take a dive, maybe they have even sold short. Who knows? 
I do not know that. Here is somebody that is gives me that advice. We 
close that possibility by the conflicted question, and then we give a 
remedy.
  Mr. Speaker, to do any less than this is to say to people, yes, we 
are going to give Members another chance. Maybe Members can get it in 
the Senate or in the conference committee; or maybe we will pass a bill 
next year and fix this. This ought to be fixed right now. We have the 
opportunity. We know what the problems are.
  We have the chairman suggesting he agrees with the gentleman from 
North Dakota (Mr. Pomeroy). We should be able to do it. There is a real 
question here that we cannot do what we all agree from the chairman on 
down is the thing to do. I urge Members to vote for this Andrews-Rangel 
substitute, and then we will have a pretty good bill.

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