In accordance
with 5 CFR 1320, the information collection is not approved at this
time. Prior to publication of the final rule, the agency should
provide to OMB a summary of all comments received on the proposed
information collection and identify any changes made in response to
these comments.
Inventory as of this Action
Requested
Previously Approved
36 Months From Approved
0
0
0
0
0
0
0
0
0
The Department is granting this
prohibited transaction class exemption (PTE) in response to its
regulation under ERISA section 3(21)(A)(ii) and Code section
4975(e)(3)(B). The Regulation amended the definition of a
"fiduciary" under ERISA and the Code to specify when a person is a
fiduciary by reason of the provision of investment advice for a fee
or other compensation regarding assets of a plan or IRA (i.e., an
investment advice fiduciary). The Regulation replaced an existing
regulation dating to 1975, with the aim of more appropriately
distinguishing between the sorts of advice relationships that
should be treated as fiduciary in nature and those that should not.
This PTE allows insurance marketing organizations (IMOs) to receive
various forms of compensation that, in the absence of an exemption,
would be prohibited under ERISA and the Code. In this regard, ERISA
and the Code generally prohibit investment advice fiduciaries from
receiving payments from third parties and from acting on conflicts
of interest, including using their authority to affect or increase
their own compensation, in connection with transactions involving a
plan or IRA. Certain types of fees and compensation, such as
insurance commissions and revenue sharing payments, commonly paid
to an IMO in connection with investment transactions entered into
by plans or IRAs, fall within these prohibitions. This PTE would
allow IMOs to receive compensation when plan participants or
beneficiaries, IRAs, or certain small plans, purchase, hold or sell
investment products based on these fiduciaries' advice, under
conditions designed to safeguard the interests of these investors.
To safeguard the interests of the plans and IRAs, the exemption
would require the IMO and the adviser to contractually acknowledge
fiduciary status and commit to adhere to certain impartial conduct
standards when providing advice to the plans and IRAs, including
providing advice in their Best Interest. The IMO would further be
required to warrant that it has adopted policies and procedures
designed to mitigate the impact of conflicts of interest and ensure
that the individual advisers adhere to impartial conduct standards.
The exemption would also require disclosure regarding adviser and
IMO fee practices. Additional conditions would apply to IMOs that
limit products available to advisers for recommendation based on
third-party payments generated or based on the fact that they are
proprietary products (i.e., products offered or managed by the IMO
or its affiliates). IMOs relying on the exemption would be required
to notify the Department in advance of doing so. Finally, financial
institutions making use of the exemption would have to maintain
certain records, and make it available to the Department.
US Code:
29
USC 1108 Name of Law: Employee Retirement Income Security Act
of 1974
This is a proposed new
prohibited transaction class exemption.
$0
No
No
No
No
No
Uncollected
Allan Beckmann 202 693-8429
beckmann.allan@dol.gov
No
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.