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. The information collections in the Department’s Principal
Transactions Exemption contain start-up costs, which were described
as Year 1 costs in the original ICR, and ongoing costs, which were
described as Year 2 and Year 3 costs in the original ICR. The
Department’s Final Rule extends the transition period through July
1, 2019. This rule has the effect of making the Year 2 and Year 3
costs inactive for the remainder of the existing approval of the
ICR and spreads the Year 1 costs across the full existing three
year approval period. The modification to the ICR is deregulatory,
because it eliminates the requirement to produce a total of 6
million disclosures during the second and third years of the ICR’s
approval period resulting in a total hour burden reduction of
approximately 112,000 hours (at an equivalent cost of $6.2 million)
and a total cost savings of approximately $862.9 million during the
second and third years of the ICR approval period only. This
savings produces an annualized reduction in the number of responses
over the three year period shown in ROCIS of 1,979,000 disclosures
(due to rounding), an annualized reduction of the hour burden of
38,000 hours (due to rounding), and a $287,600,000 reduction to the
cost burden (due to rounding). For purposes of ROCIS database
entries, the burden has been reduced over the three-year approval
period to 821,000 responses (rounded), 15,000 hours (rounded), and
$651,800,000 (rounded) annually.
No
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 10-3-17.docx
Regulatory Impact Analysis (Website).pdf
Conditions of Principal Transactions PTE