Prohibited Transaction Exemptions

[tigerdallas]

What exemption does a mutual fund company use to invest the assets of its' own employee plan into its' own mutual fund and still receive full management compensation (expense ratios)?

I don't see anything in 4975(d) exemptions. While PTE 96-62 allows individual requests of party in interest exemptions, it doesn't apply to anyone but the applicant.

There are 3 PTEs that seem to cover the situation, but I’m unsure of the application.

1. PTE 1977-03 Open-End Mutual Funds In-House Plans: Permits the purchase and sale of open-end mutual fund shares by a plan which only covers employees of a mutual fund, its investment adviser or principal underwriter, or an affiliate. There are two key points that make me think this does not apply:

a. “…the investment adviser for which is also a fiduciary with respect to the plan (or an affiliate of such fiduciary) and is not an employer of employees covered by the plan

b. The plan does not pay an investment management, investment advisory or similar fee with respect to the plan assets invested, in such shares for the entire period of such investment

2. PTE 1977-04 Open-End Mutual Funds Investment Advisor Permits: the purchase and sale of open-end mutual fund shares by a plan when a plan fiduciary is also the investment adviser for the investment company marketing the mutual fund.

3. PTE 1979-13 Closed-End Mutual Fund In-House Permits: the purchase and sale of shares of closed-end mutual funds by plans which cover only employees of either the mutual fund, its investment adviser or an affiliate.

[jpod]

Why do you think that 77-4 isn't directly on point and applicable?

[tigerdallas]

I can't find the full text online. That's why I wasn't sure if it did the trick. I've since got a look at it and think it's fine.

Thank you.