[House Report 107-289]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-289

======================================================================



 
 PROVIDING FOR CONSIDERATION OF H.R. 2269, RETIREMENT SECURITY ADVICE 
                              ACT OF 2001

                                _______
                                

 November 14, 2001.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

            Ms. Pryce of Ohio, from the Committee on Rules, 
                        submitted the following

                              R E P O R T

                       [To accompany H. Res. 288]

    The Committee on Rules, having had under consideration 
House Resolution 288, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                summary of provisions of the resolution

    The resolution provides for consideration in the House of 
H.R. 2269, the Retirement Security Advice Act of 2001, under a 
modified closed rule. The rule provides one hundred minutes of 
debate with sixty minutes equally divided and controlled by the 
chairman and ranking minority member of the Committee on 
Education and the Workforce and forty minutes equally divided 
and controlled by the chairman and ranking minority member of 
the Committee on Ways and Means. The rule provides that, in 
lieu of the amendments recommended by the Committee on 
Education and the Workforce and the Committee on Ways and Means 
now printed in the bill, the amendment in the nature of a 
substitute printed in part A of this report shall be considered 
as adopted. The rule waives all points of order against 
consideration of the bill as amended.
    The rule further provides for consideration of the 
amendment printed in part B of this report if offered by 
Representative George Miller of California or his designee, 
which shall be considered as read and shall be separately 
debatable for one hour equally divided and controlled by the 
proponent and an opponent. The rule waives all points of order 
against the amendment printed in part B of this report. 
Finally, the rule provides one motion to recommit with or 
without instructions.

           SUMMARY OF AMENDMENTS MADE IN ORDER UNDER THE RULE

    (Summaries derived from information provided by amendment 
sponsors.)

                                 PART A


Summary of amendment to be considered as adopted

    Amendment in the Nature of a Substitute. Combines the 
provisions reported by the Committee on Education and the 
Workforce and the Committee on Ways and Means. Provides a 
statutory exemption from the prohibited transaction rules of 
the Employee Retirement Income Security Act (ERISA) and the 
Internal Revenue Code (IRC) for: the provision of investment 
advice regarding plan assets subject to the direction of plan 
participants and beneficiaries to a plan, its participants and 
beneficiaries; the sale, acquisition, or holding of securities 
or other property pursuant to such investment advice; and the 
direct or indirect receipt for fees or other compensation in 
connection with providing the advice. Requires an entity to be 
a ``fiduciary adviser'' and meet a series of detailed 
requirements to qualify for an exemption. Requires the 
fiduciary adviser to provide a clear and conspicuous written 
(including electronic) disclosure of: the fees or other 
compensation that the fiduciary adviser and its affiliates 
receive relating to the provision of investment advice or a 
resulting sale or acquisition of securities or other property 
(including from third parties); any interest of the fiduciary 
adviser (and its affiliates) in any security or other property 
recommended, purchased or sold; any limitation placed on the 
fiduciary's ability to provide advice; the advisory services 
offered; that the adviser is acting as a fiduciary of the plan 
in connection with the provision of such advice; and any 
information required to be disclosed under applicable 
securities laws. Requires that this disclosure must be made at 
a time reasonably contemporaneous with the initial provision of 
advice and annually thereafter, or it there is a material 
change or at the participant's request, and that the disclosure 
must be written in a way that the average plan participant 
could understand the information. Requires that the terms of 
the transaction be at least as favorable to the plan as an 
arm's length transaction would be, and the compensation 
received by the fiduciary adviser (and its affiliates) in 
connection with any transaction to be reasonable. Also requires 
the fiduciary adviser to provide a written acknowledgment that 
it is acting as a fiduciary of the plan to the plan sponsor and 
to comply with a 6-year record-keeping requirement (for records 
necessary to determine whether the conditions of the exemption 
have been met). Provides that a plan sponsor or other fiduciary 
that arranges for a fiduciary adviser to provide investment 
advice to participants and beneficiaries has no duty to monitor 
the specific investment advice given by the fiduciary adviser 
to any particular recipient of advice, but the plan sponsor or 
other fiduciary retains the duty of prudent selection and 
periodic review of the fiduciary adviser.

                                 PART B


Summary of amendment made in order under the rule

    George Miller, Democratic Substitute. Under the Democratic 
substitute, the prohibited transaction rules under section 4975 
of the Internal Revenue Code, and sections 406 and 408 of the 
Employee Retirement Security Act (ERISA) would be waived if the 
following requirements are met:
    1. Disclosure: At the time of providing advice with regard 
to the sale, acquisition, or holding of the security or other 
property, the advisor would be required to provide the plan 
participant or beneficiary under the plan with a clear and 
conspicuous notification of the factors set forth below. The 
disclosure could be written or provided by electronic means in 
a manner to be reasonably understood by the average plan 
participant. The Secretary would be required to provide a model 
disclosure form pursuant to regulations. The model disclosure 
form would include mathematical examples that are understood by 
the average plan participant.
    The advisor would be required to disclose any interest of 
such advisor, or any affiliation or contractual relationship of 
the advisor with any third party who has an interest in the 
security or other property. The advisor also would be required 
to disclose all fees and other compensations (including ongoing 
fees and compensation) relating to the advice that the advisor 
(or any affiliate) is to receive in connection with providing 
advice, or in connection with the sale, acquisition, or holding 
of the security or other property.
    2. Available option for independent advisor: In cases where 
the advisor has an interest in the security or other property, 
or has an affiliation or contractual relationship with any 
third party that has an interest in the security or other 
property, the advisor would be required to arrange, as an 
alternative to the advice that would otherwise be provided by 
the advisor, qualified investment advice with respect to the 
security or the other property provided by at least one 
alternative investment advisor meeting the qualification 
requirements set forth in the bill.
    The alternative independent advice would be provided under 
the same terms and conditions, including no additional charge 
to the participant or beneficiary, as apply with respect to the 
investment advice to be provided by the advisor.
    3. Qualification of individuals providing advice: An 
individual providing investment advice would be required to be 
(1) registered as an investment advisor under the Investment 
Advisers Act of 1940, (2) if not registered under such act, 
registered under the laws of the state in which the fiduciary 
maintains its principal office and place of business, (3) 
registered as a broker or dealer under the Securities Exchange 
Act of 1934, (4) a bank or similar financial institution as 
defined in the Investment Advisers Act of 1940, (5) an 
insurance company qualified to do business under the laws of 
the state, or (6) any other comparable qualified entity which 
satisfies such criteria as the Secretary determines 
appropriate.
    Additional requirements would be imposed on employees of 
the entities listed above, and whose duties include providing 
qualified investment advice. Such individuals would be required 
to be (a) registered under the Investment Advisers Act or under 
state laws as previously provided, (b) a registered broker or 
dealer under the Securities Exchange Act, or (c) meet such 
other comparable standard as set forth by the Secretary.
    4. Remedies available to plan participant: The plan 
participant who successfully brings a cause of action under 
ERISA against the fiduciary for a breach of fiduciary duty 
would be entitled to recover, from the advisor, any economic 
loss suffered as a result of such breach.
                              ----------                              


             TEXT OF AMENDMENT TO BE CONSIDERED AS ADOPTED

  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 Employee Retirement Income Security Act 
of 1974.--
          (1) Exemption from prohibited transactions.--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 investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  ``(ii) the advice is provided to the plan or 
                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 the provision of the 
                advice.
          ``(B) The transactions described in this subparagraph 
        are the following:
                  ``(i) the provision of the advice to the 
                plan, 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 or 
                in connection with a sale, acquisition, or 
                holding of a security or other property 
                pursuant to the advice.''.
          (2) Requirements.--Section 408 of such Act is amended 
        further by adding at the end the following new 
        subsection:
  ``(g) Requirements Relating to Provision of Investment Advice 
by Fiduciary Advisers.--
          ``(1) In general.--The requirements of this 
        subsection are met in connection with the provision of 
        investment advice referred to in section 3(21)(A)(ii), 
        provided to an employee benefit plan or 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--
                  ``(A) in the case of the initial provision of 
                the advice with regard to the security or other 
                property by the fiduciary adviser to the plan, 
                participant, or beneficiary, the fiduciary 
                adviser provides to the recipient of the 
                advice, at a time reasonably contemporaneous 
                with the initial provision of the advice, a 
                written notification (which may consist of 
                notification by means of electronic 
                communication)--
                          ``(i) of all fees or other 
                        compensation relating to the advice 
                        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,
                          ``(ii) of any material affiliation or 
                        contractual relationship of the 
                        fiduciary adviser or affiliates thereof 
                        in the security or other property,
                          ``(iii) of any limitation placed on 
                        the scope of the investment advice to 
                        be provided by the fiduciary adviser 
                        with respect to any such sale, 
                        acquisition, or holding of a security 
                        or other property,
                          ``(iv) of the types of services 
                        provided by the fiduciary advisor in 
                        connection with the provision of 
                        investment advice by the fiduciary 
                        adviser, and
                          ``(v) that the adviser is acting as a 
                        fiduciary of the plan in connection 
                        with the provision of the advice,
                  ``(B) the fiduciary adviser provides 
                appropriate disclosure, in connection with the 
                sale, acquisition, or holding of the security 
                or other property, in accordance with all 
                applicable securities laws,
                  ``(C) the sale, acquisition, or holding 
                occurs solely at the direction of the recipient 
                of the advice,
                  ``(D) the compensation received by the 
                fiduciary adviser and affiliates thereof in 
                connection with the sale, acquisition, or 
                holding of the security or other property is 
                reasonable, and
                  ``(E) the terms of the sale, acquisition, or 
                holding of the security or other property are 
                at least as favorable to the plan as an arm's 
                length transaction would be.
          ``(2) Standards for presentation of information.--The 
        notification required to be provided to participants 
        and beneficiaries under paragraph (1)(A) shall be 
        written in a clear and conspicuous manner and in a 
        manner calculated to be understood by the average plan 
        participant and shall be sufficiently accurate and 
        comprehensive to reasonably apprise such participants 
        and beneficiaries of the information required to be 
        provided in the notification.
          ``(3) Exemption conditioned on continued availability 
        of required information on request for 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) to the plan, participant, or beneficiary if, at any 
        time during the provision of advisory services to the 
        plan, participant, or beneficiary, the fiduciary 
        adviser fails to maintain the information described in 
        clauses (i) through (iv) of subparagraph (A) in 
        currently accurate form and in the manner described in 
        paragraph (2) or fails--
                  ``(A) to provide, without charge, such 
                currently accurate information to the recipient 
                of the advice no less than annually,
                  ``(B) to make such currently accurate 
                information available, upon request and without 
                charge, to the recipient of the advice, or
                  ``(C) in the event of a material change to 
                the information described in clauses (i) 
                through (iv) of paragraph (1)(A), to provide, 
                without charge, such currently accurate 
                information to the recipient of the advice at a 
                time reasonably contemporaneous to the material 
                change in information.
          ``(4) Maintenance for 6 years of evidence of 
        compliance.--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.
          ``(5) Exemption for plan sponsor and certain other 
        fiduciaries.--
                  ``(A) In general.--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 investment advice referred to 
                in section 3(21)(A)(ii) (or solely by reason of 
                contracting for or otherwise arranging for the 
                provision of the 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 investment advice 
                        referred to in such section,
                          ``(ii) the terms of the arrangement 
                        require compliance by the fiduciary 
                        adviser with the requirements of this 
                        subsection, and
                          ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary 
                        adviser is a fiduciary of the plan with 
                        respect to the provision of the advice.
                  ``(B) Continued duty of prudent selection of 
                adviser and periodic review.--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 forthe 
provision of advice referred to in section 3(21)(A)(ii). The plan 
sponsor or other person who is a fiduciary has no duty under this part 
to monitor the specific investment advice given by the fiduciary 
adviser to any particular recipient of the advice.
                  ``(C) Availability of plan assets for payment 
                for advice.--Nothing in this part shall be 
                construed to preclude the use of plan assets to 
                pay for reasonable expenses in providing 
                investment advice referred to in section 
                3(21)(A)(ii).
          ``(6) Definitions.--For purposes of this subsection 
        and subsection (b)(14)--
                  ``(A) Fiduciary adviser.--The term `fiduciary 
                adviser' means, with respect to a plan, a 
                person who is a fiduciary of the plan by reason 
                of the provision of investment advice by the 
                person to the plan or to a participant or 
                beneficiary and who is--
                          ``(i) registered as an investment 
                        adviser under the Investment Advisers 
                        Act of 1940 (15 U.S.C. 80b-1 et seq.) 
                        or under the laws of the State in which 
                        the fiduciary maintains its principal 
                        office and place of business,
                          ``(ii) a bank or similar financial 
                        institution referred to in section 
                        408(b)(4),
                          ``(iii) an insurance company 
                        qualified to do business under the laws 
                        of a State,
                          ``(iv) a person registered as a 
                        broker or dealer under the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78a et 
                        seq.),
                          ``(v) an affiliate of a person 
                        described in any of clauses (i) through 
                        (iv), or
                          ``(vi) an employee, agent, or 
                        registered representative of a person 
                        described in any of clauses (i) through 
                        (v) who satisfies the requirements of 
                        applicable insurance, banking, and 
                        securities laws relating to the 
                        provision of the advice.
                  ``(B) Affiliate.--The term `affiliate' of 
                another entity means an affiliated person of 
                the 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 the 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 the entity for the 
                investment adviser referred to in such 
                section).''.
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) Exemption from prohibited transactions.--
        Subsection (d) of section 4975 of the Internal Revenue 
        Code of 1986 (relating to exemptions from tax on 
        prohibited transactions) is amended--
                  (A) in paragraph (14), by striking ``or'' at 
                the end;
                  (B) in paragraph (15), by striking the period 
                at the end and inserting ``; or''; and
                  (C) 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 investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  ``(B) the advice is provided to the plan or 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 the 
                provision of the advice.''
          (2) Allowed transactions and requirements.--
        Subsection (f) of such section 4975 (relating to other 
        definitions and special rules) is amended by adding at 
        the end the following new paragraph:
          ``(7) Provisions relating to investment advice 
        provided by fiduciary advisers.--
                  ``(A) Transactions allowable in connection 
                with investment advice provided by fiduciary 
                advisers.--The transactions referred to in 
                subsection (d)(16), in connection with the 
                provision of investment advice by a fiduciary 
                adviser, are the following:
                          ``(i) the provision of the advice to 
                        the plan, 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 or in connection with a sale, 
                        acquisition, or holding of a security 
                        or other property pursuant to the 
                        advice.
                  ``(B) Requirements relating to provision of 
                investment advice by fiduciary advisers.--The 
                requirements of this subparagraph (referred to 
                in subsection (d)(16)(C)) are met in connection 
                with the provision of investment advice 
                referred to in subsection (e)(3)(B), provided 
                to a plan or a participant or beneficiary of a 
                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--
                          ``(i) in the case of the initial 
                        provision of the advice with regard to 
                        the security or other property by the 
                        fiduciary adviser to the plan, 
                        participant, or beneficiary, the 
                        fiduciary adviser provides to the 
                        recipient of the advice, at a time 
                        reasonably contemporaneous with the 
                        initial provision of the advice, a 
                        written notification (which may consist 
                        of notification by means of electronic 
                        communication)--
                                  ``(I) of all fees or other 
                                compensation relating to the 
                                advice 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,
                                  ``(II) of any material 
                                affiliation or contractual 
                                relationship of the fiduciary 
                                adviser or affiliates thereof 
                                in the security or other 
                                property,
                                  ``(III) of any limitation 
                                placed on the scope of the 
                                investment advice to be 
                                provided by the fiduciary 
                                adviser with respect to any 
                                such sale, acquisition, or 
                                holding of a security or other 
                                property,
                                  ``(IV) of the types of 
                                services provided by the 
                                fiduciary advisor in connection 
                                with the provision of 
                                investment advice by the 
                                fiduciary adviser, and
                                  ``(V) that the adviser is 
                                acting as a fiduciary of the 
                                plan in connection with the 
                                provision of the advice,
                          ``(ii) the fiduciary adviser provides 
                        appropriate disclosure, in connection 
                        with the sale, acquisition, or holding 
                        of the security or other property, in 
                        accordance with all applicable 
                        securities laws,
                          ``(iii) the sale, acquisition, or 
                        holding occurs solely at the direction 
                        of the recipient of the advice,
                          ``(iv) the compensation received by 
                        the fiduciary adviser and affiliates 
                        thereof in connection with the sale, 
                        acquisition, or holding of the security 
                        or other property is reasonable, and
                          ``(v) the terms of the sale, 
                        acquisition, or holding of the security 
                        or other property are at least as 
                        favorable to the plan as an arm's 
                        length transaction would be.
                  ``(C) Standards for presentation of 
                information.--The notification required to be 
                provided to participants and beneficiaries 
                under subparagraph (B)(i) shall be written in a 
                clear and conspicuous manner and in a manner 
                calculated to be understood by the average plan 
                participant and shall be sufficiently accurate 
                and comprehensive to reasonably apprise such 
                participants and beneficiaries of the 
                information required to be provided in the 
                notification.
                  ``(D) Exemption conditioned on making 
                required information available annually, on 
                request, and in the event of material change.--
                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) to the 
                plan, participant, or beneficiary if, at any 
                time during the provision of advisory services 
                to the plan, participant, or beneficiary, the 
                fiduciary adviser fails to maintain the 
                information described in subclauses (I) through 
                (IV) of subparagraph (B)(i) in currently 
                accurate form and in the manner required by 
                subparagraph (C), or fails--
                          ``(i) to provide, without charge, 
                        such currently accurate information to 
                        the recipient of the advice no less 
                        than annually,
                          ``(ii) to make such currently 
                        accurate information available, upon 
                        request and without charge, to the 
                        recipient of the advice, or
                          ``(iii) in the event of a material 
                        change to the information described in 
                        subclauses (I) through (IV) of 
                        subparagraph (B)(i), to provide, 
                        without charge, such currently accurate 
                        information to the recipient of the 
                        advice at a time reasonably 
                        contemporaneous to the material change 
                        in information.
                  ``(E) Maintenance for 6 years of evidence of 
                compliance.--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.
                  ``(F) Exemption for plan sponsor and certain 
                other fiduciaries.--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 
                section solely by reason of the provision of 
                investment advice referred to in subsection 
                (e)(3)(B) (or solely by reason of contracting 
                for or otherwise arranging for the provision of 
                the 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 investment advice 
                        referred to in such section,
                          ``(ii) the terms of the arrangement 
                        require compliance by the fiduciary 
                        adviser with the requirements of this 
                        paragraph,
                          ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary 
                        adviser is a fiduciary of the plan with 
                        respect to the provision of the advice, 
                        and
                          ``(iv) the requirements of part 4 of 
                        subtitle B of title I of the Employee 
                        Retirement Income Security Act of 1974 
                        are met in connection with the 
                        provision of such advice.
                  ``(G) Definitions.--For purposes of this 
                paragraph and subsection (d)(16)--
                          ``(i) Fiduciary adviser.--The term 
                        `fiduciary adviser' means, with respect 
                        to a plan, a person who is a fiduciary 
                        of the plan by reason of the provision 
                        of investment advice by the person to 
                        the plan or to a participant or 
                        beneficiary and who is--
                                  ``(I) registered as an 
                                investment adviser under the 
                                Investment Advisers Act of 1940 
                                (15 U.S.C. 80b-1 et seq.) or 
                                under the laws of the State in 
                                which the fiduciary maintains 
                                its principal office and place 
                                of business,
                                  ``(II) a bank or similar 
                                financial institution referred 
                                to in subsection (d)(4),
                                  ``(III) an insurance company 
                                qualified to do business under 
                                the laws of a State,
                                  ``(IV) a person registered as 
                                a broker or dealer under the 
                                Securities Exchange Act of 1934 
                                (15 U.S.C. 78a et seq.),
                                  ``(V) an affiliate of a 
                                person described in any of 
                                subclauses (I) through (IV), or
                                  ``(VI) an employee, agent, or 
                                registered representative of a 
                                person described in any of 
                                subclauses (I) through (V) who 
                                satisfies the requirements of 
                                applicable insurance, banking, 
                                and securities laws relating to 
                                the provision of the advice.
                          ``(ii) Affiliate.--The term 
                        `affiliate' of another entity means an 
                        affiliated person of the entity (as 
                        defined in section 2(a)(3) of the 
                        Investment Company Act of 1940 (15 
                        U.S.C. 80a-2(a)(3))).
                          ``(iii) 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 the 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 the entity for 
                        the investment adviser referred to in 
                        such section).''

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.
                              ----------                              


             text of amendment made in order under the rule

     An Amendment To Be Offered by Representative George Miller of 
          California, or a Designee, Debatable for 60 Minutes

  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.--
                  ``(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 
                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.
                          ``(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.
                  ``(F) 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 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).''.
          (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.

                                
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