ERISA-DOL Says That PTE 86-128 Applies To An Investment Advisor

In Advisory Opinion 2011-08A, the Department of Labor (the “DOL”) provided guidance on the application of Prohibited Transaction Class Exemption (“PTC”) 86-128. That PTC generally allows a person, who is a fiduciary with respect to a plan or an affiliate of such a fiduciary, to engage in a securities transaction for a fee as an agent on behalf of the plan. In this Advisory Opinion, the DOL said that the PTC applies when that person is a fiduciary by reason of rendering investment advice to a plan, under section 3(21)(A)(ii) of ERISA. Apparantly, this will continue to apply after the proposed changes to the regulations under that section (issued on October 22, 2010) are finalized
The DOL warns that a fiduciary or an affiliate who receives a fee for executing a securities transaction, which is carried out in accordance with the fiduciary’s investment advice, would be using its authority as a fiduciary to cause the plan to pay a fee, within the meaning of section II(a) of PTC 86-128. As a result, that fiduciary or affiliate would be engaging in a prohibited transaction unless the conditions of the PTC are met.

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