The Department is granting this
prohibited transaction class exemption (PTE) in connection with its
regulation under ERISA section 3(21)(A)(ii) and Code section
4975(e)(3)(B). The Regulation amends 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 replaces 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.
The proposed exemption would allow an individual investment advice
fiduciary (an adviser) and the firm that employs or otherwise
contracts with the adviser (a financial institution) to engage in
principal transactions involving certain debt securities with plans
and IRAs. The proposed exemption limits the type of debt securities
that may be purchased or sold and contains conditions which the
adviser and financial institution must satisfy in order to rely on
the exemption. To safeguard the interests of plans and IRAs, the
exemption would require the adviser and financial institution to
contractually acknowledge fiduciary status and commit to adhere to
certain impartial conduct standards when providing advice to the
plan or IRA, including providing advice that is in the plan's or
IRA's Best Interest. The financial institution 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 the impartial conduct
standards. The plan or IRA would be required to consent to the
principal transactions following disclosure of the conflicts of
interest associated with such transactions. Additional disclosure
of the mark-up or mark-down applied to the prevailing market price
of the security would be required and financial institutions would
be subject to recordkeeping requirements. The Department is issuing
technical corrections to its final Principal Transactions Exemption
which was published in the Federal Register on April 8, 2016 (81 FR
21089). All of the corrections either fix typographical errors or
make minor clarifications to provisions that might otherwise be
confusing.
US Code:
29
USC 1108 Name of Law: Employee Retirement Income Security
Act
The Department is hereby
submitting a nonmaterial/non-substantive change request to the
Office of Management and Budget (OMB) regarding a modification made
by the Department’s Final Conflict of Interest Rule to the
information collection request (ICR) contained in the Department’s
Principal Transaction Exemption. The exemption was approved by OMB
under control number 1210-0157 and is scheduled to expire on June
30, 2019. Section VII of the final exemption requires financial
institutions using the exemption to furnish a written statement of
fiduciary status, specified disclosures, and a written commitment
to adhere to impartial conduct standards to all retirement
investors (in ERISA plans, Individual Retirement Accounts, and
non-ERISA plans) prior to or at the same time as the execution of
recommended transactions (the “Transition Disclosure”). Pursuant to
the final rule, financial institutions using the Principal
Transaction Exemption will not be required to send the Transition
Disclosure. The modification to the ICR is deregulatory, because it
eliminates the requirement to send an estimated 2.5 million
Transition Disclosures resulting in an hour burden reduction of
approximately 40,000 hours (at an equivalent cost of $2.2 million)
and cost savings of approximately $760,000 during the first year of
the ICR approval period only. This savings produces an annualized
reduction over the three year period shown in ROCIS of 13,000 hours
(due to rounding) and $300,000 (due to rounding). For purposes of
ROCIS database entries, the burden has been reduced over the
three-year approval period to 53,000 hours (rounded) and $939.4
million (rounded) annually.
No
No
No
No
No
Uncollected
Chris Cosby 202
693-8540
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.
Principal Transactions Exemption Nonsubstantive Change 3-31-17.docx
Regulatory Impact Analysis (Website).pdf
Conditions of Principal Transactions PTE