(a) In general. Section 407(a)(1) of the Employee Retirement Income
Security Act of 1974 (the Act) states that except as otherwise provided
in section 407 and section 414 of the Act, a plan may not acquire or
hold any employer security which is not a qualifying employer security
or any employer real property which is not qualifying employer real
property. Section 406(a)(1)(E) prohibits a fiduciary from knowingly
causing a plan to engage in a transaction which
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constitutes a direct or indirect acquisition, on behalf of a plan, of
any employer security or employer real property in violation of section
407(a), and section 406(a)(2) prohibits a fiduciary who has authority or
discretion to control or manage assets of a plan to permit the plan to
hold any employer security or employer real property if he knows or
should know that holding such security or real property violates section
407(a).
(b) Requirements applicable to all plans. A plan may hold or acquire
only employer securities which are qualifying employer securities and
employer real property which is qualifying employer real property. A
plan may not hold employer securities and employer real property which
are not qualifying employer securities and qualifying employer real
property, except to the extent that:
(1) The employer security is held by a plan which has made an
election under section 407(c)(3) of the Act; or
(2) The employer security is a loan or other extension of credit
which satisfies the requirements of section 414(c)(1) of the Act or the
employer real property is leased to the employer pursuant to a lease
which satisfies the requirements of section 414(c)(2) of the Act.
[42 FR 47201, Sept. 20, 1977; 42 FR 59842, Nov. 22, 1977]
