(a)-(b) [Reserved]
(c) Investment advice. (1) A person shall be deemed to be rendering
``investment advice'' to an employee benefit plan, within the meaning of
section 3(21)(A)(ii) of the Employee Retirement Income Security Act of
1974 (the Act) and this paragraph, only if:
(i) Such person renders advice to the plan as to the value of
securities or other property, or makes recommendation as to the
advisability of investing in, purchasing, or selling securities or other
property; and
(ii) Such person either directly or indirectly (e.g., through or
together with any affiliate)--
(A) Has discretionary authority or control, whether or not pursuant
to agreement, arrangement or understanding, with respect to purchasing
or selling securities or other property for the plan; or
(B) Renders any advice described in paragraph (c)(1)(i) of this
section on a regular basis to the plan pursuant to a mutual agreement,
arrangement or understanding, written or otherwise, between such person
and the plan or a fiduciary with respect to the plan, that such services
will serve as a primary basis for investment decisions with respect to
plan assets, and that such person will render individualized investment
advice to the plan based on the particular needs of the plan regarding
such matters as, among other things, investment policies or strategy,
overall portfolio composition, or diversification of plan investments.
(2) A person who is a fiduciary with respect to a plan by reason of
rendering investment advice (as defined in paragraph (c)(1) of this
section) for a fee or other compensation, direct or indirect, with
respect to any moneys or other property of such plan, or having any
authority or responsibility to do so, shall not be deemed to be a
fiduciary regarding any assets of the plan with respect to which such
person does not have any discretionary authority, discretionary control
or discretionary responsibility, does not exercise any authority or
control, does not render investment advice (as defined in paragraph
(c)(1) of this section) for a fee or other compensation, and does not
have any authority or responsibility to render such investment advice,
provided that nothing in this paragraph shall be deemed to:
(i) Exempt such person from the provisions of section 405(a) of the
Act concerning liability for fiduciary breaches by other fiduciaries
with respect to any assets of the plan; or
(ii) Exclude such person from the definition of the term ``party in
interest'' (as set forth in section 3(14)(B) of the Act) with respect to
any assets of the plan.
(d) Execution of securities transactions. (1) A person who is a
broker or dealer registered under the Securities Exchange Act of 1934, a
reporting dealer who makes primary markets in securities of the United
States Government or of an agency of the United States Government and
reports daily to the Federal Reserve Bank of New York its positions with
respect to such securities and borrowings thereon, or a bank supervised
by the United States or a State, shall not be deemed to be a fiduciary,
within the meaning of section 3(21)(A) of the Act, with respect to an
employee benefit plan solely because such person executes transactions
for the purchase or sale of securities on behalf of such plan in the
ordinary course of its business as a broker, dealer, or bank, pursuant
to instructions of a fiduciary with respect to such plan, if:
(i) Neither the fiduciary nor any affiliate of such fiduciary is
such broker, dealer, or bank; and
(ii) The instructions specify (A) the security to be purchased or
sold, (B) a price range within which such security is to be purchased or
sold, or, if such security is issued by an open-end investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1, et
seq.), a price which is determined in accordance with Rule 22c-1 under
the Investment Company Act of 1940 (17 CFR 270.22c-1), (C) a time span
during which such security may be purchased or sold (not to exceed five
business days), and (D) the minimum or maximum quantity of such security
which may be purchased or sold within such price range, or, in the case
of a security issued by an open-end investment company registered under
the Investment Company Act of 1940, the minimum or maximum quantity of
such security which may be purchased or sold, or the value of such
security in dollar amount which may be purchased or sold, at the price
referred to in paragraph (d)(1)(ii)(B) of this section.
(2) A person who is a broker-dealer, reporting dealer, or bank which
is a fiduciary with respect to an employee benefit plan solely by reason
of the possession or exercise of discretionary authority or
discretionary control in the management of the plan or the management or
disposition of plan assets in connection with the execution of a
transaction or transactions for the purchase or sale of securities on
behalf of such plan which fails to comply with the provisions of
paragraph (d)(1) of this section, shall not be deemed to be a fiduciary
regarding any assets of the plan with respect to which such broker-
dealer, reporting dealer or bank does not have any discretionary
authority, discretionary control or discretionary responsibility, does
not exercise any authority or control, does not render investment advice
(as defined in paragraph (c)(1) of this section) for a fee or other
compensation, and does not have any authority or responsibility to
render such investment advice, provided that nothing in this paragraph
shall be deemed to:
(i) Exempt such broker-dealer, reporting dealer, or bank from the
provisions of section 405(a) of the Act concerning liability for
fiduciary breaches by other fiduciaries with respect to any assets of
the plan; or
(ii) Exclude such broker-dealer, reporting dealer, or bank from the
definition, of the term ``party in interest'' (as set forth in section
3(14)(B) of the Act) with respect to any assets of the plan.
(e) Affiliate and control. (1) For purposes of paragraphs (c) and
(d) of this section, an ``affiliate'' of a person shall include:
(i) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
such person;
(ii) Any officer, director, partner, employee or relative (as
defined is section 3(15) of the Act) of such person; and
(iii) Any corporation or partnership of which such person is an
officer, director or partner.
(2) For purposes of this paragraph, the term ``control'' means the
power to exercise a controlling influence over the management or
policies of a person other than an individual.
[40 FR 50843, Oct. 31, 1975]
