Recordkeeper collecting asset based fees.

[SRP]

Are there any requirements that prevent a recordkeeper from collecting asset based fees? I work with a recordkeeper that has a sister company that is a Registered Investment Advisor which was created some time ago for the purpose of collecting asset based fees from the plan. We do not provide investment advice only recordkeeping, admistratiive types of services. We are getting deeper and deeper into many issues with the SEC due to the SEC registration that we have and I am wondering if there is a way out from underneath the SEC's scope since we are not providing investment advice.

[alanm]

You must split your contract, having one for the RIA and one for the TPA and make disclosure of the affiliation and all fees including 12b-1 and sub ta fees--down to the participant level if you want 404© to apply. If you have custody of the assets, meaning you trade these funds and go in and get your fees; you have an added problem because an RIA cannot take custody, an exemption applies to a Broker dealer with adequate capital proscribed by rule 206(4) under the 1934 Act.

If you are doing the record keeping as a TPA, you can charge a basis point fee and present a fee trading file to the trustee and custodian to get paid. Since you are not giving investment advice, the SEC is not a concern. The TPA can operate a contribution, distribution bank account under CFR 2509.75-8 as a conduit; I have been audited by the DOL on that and passed. However, the RIA will have to pay atttention to the custody issue and to proper disclosure, because they are a fiduciary and cannot funnel business to the affiliated TPA without careful disclosure. But, the basis point fee arrangement can be done. The fact you may have a bank as a named custodian does not exempt the RIA as a deemed custodian if you operate an omnibus account that co-mingles plans or have access to get you fees. That is the SECs view and you can read it at

http://sec.gov/divisions/ocie/advltr.htm

[david rigby]

This from DOL, and also look at its references to staff report from the SEC.

http://benefitslink.com/DOL/pensionconsultants.pdf