Guest Article

(From the December 15, 2003 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

DOL Proposes Electronic Filing for ERISA Investment Advisers

Proposed regulations issued December 9 by the Department of Labor's Employee Benefits Security Administration would require state-registered investment advisers that want to be ERISA investment managers to file through the Internet-based Investment Adviser Registration Depository (IARD) instead of providing copies of their state registration forms to DOL. 68 FR 68710 (December 9, 2003). Most state-registered investment advisers already file with IARD, so the proposed regulation would make the process more efficient both for the advisers and the DOL.

Background

ERISA section 402(a)(3) gives ERISA plans the option of allowing their named fiduciaries to appoint investment managers to decide how and where to invest the plan's assets, subject to the plan's investment plan. If the named fiduciary appoints an investment manager, ERISA section 405(d) relieves the plan's other trustees from any obligation to invest or manage the assets under the investment manager's direction. It also offers them some protection from co-fiduciary liability for any fiduciary breaches by the investment manager.

These special rules only apply, however, if the investment manager acknowledges in writing it is a fiduciary with respect to the plan, and meets certain other requirements. Specifically, unless the investment manager is a bank or insurance company, it must be registered with the SEC under the Investment Advisers Act of 1940 or, if it has less than $25 million under management, with the state in which it maintains its principal office and place of business. ERISA section 3(38)(B). State-registered investment advisers also must file up-to-date copies of their registration forms with the Secretary of Labor.

In 2000 the SEC published new rules requiring all SEC-registered investment advisers to file electronically through the IARD. Furthermore, all states now accept forms filed via the IARD to satisfy state registration requirements, and many mandate state registration via the IARD. So, as the preamble to the proposed regulations puts it, the IARD "has become a 'one-stop' Internetbased centralized filing system that enables investment advisers to satisfy filing obligations with both federal and state securities regulators."

Summary of the Proposed Rule

The proposed rule, which investment advisers can rely on beginning immediately, would clarify that state-registered investment advisers must file through the IARD in order to satisfy their DOL filing requirement. Once the proposed regulations are issued in final form, the Labor Secretary no longer will accept copies of state forms for purposes of this requirement.

The DOL believes this change will make compliance easier for state-registered investment advisers because, as noted, most already file through the IARD any way. Furthermore, the pertinent filing information-- including information about current registration forms, registration status, services provided, fees charged, and disclosures about certain conflicts of interest and disciplinary events, if any-- will continue to be readily available to the DOL, plan fiduciaries, and plan participants through the Investment Adviser Public Disclosure (IAPD) Web site, which is accessible through the SEC's Web site.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have questions or need additional information about this article, please contact Martha Priddy Patterson (202.879.5634) or Robert B. Davis (202.879.3094). Copyright 2003, Deloitte.