On March 12, 1975, the Department of Labor issued an interpretive
bulletin, ERISA IB 75-3, with regard to its interpretation of section
3(21)(B) of the Employee Retirement Income Security Act of 1974. That
section provides that an investment by an employee benefit plan in
securities issued by an investment company registered under the
Investment Company Act of 1940 shall not by itself cause the investment
company, its investment adviser or principal underwriter to be deemed to
be a fiduciary or party in interest ``except insofar as such investment
company or its investment adviser or principal underwriter acts in
connection with an employee benefit plan covering employees of the
investment company, the investment adviser, or its principal
underwriter.''
The Department of Labor interprets this section as an elaboration of
the principle set forth in section 401(b)(1) of the Act and ERISA IB 75-
2 (issued February 6, 1975) that the assets of an investment company
shall not be deemed to be assets of a plan solely by reason of an
investment by such plan in the shares of such investment company.
Consistent with this principle, the Department of Labor interprets this
section to mean that a person who is connected with an investment
company, such as the investment company itself, its investment adviser
or its principal underwriter, is not to be deemed to be a fiduciary of
or party in interest with respect to a plan solely because the plan has
invested in the investment company's shares.
This principle applies, for example, to a plan covering employees of
an investment adviser to an investment company where the plan invests in
the securities of the investment company. In such a case the investment
company or its principal underwriter is not to be deemed to be a
fiduciary of or party in interest with respect to the plan solely
because of such investment.
On the other hand, the exception clause in section 3(21) emphasizes
that if an investment company, its investment adviser or its principal
underwriter is a fiduciary or party in interest for a reason other than
the investment in the securities of the investment company, such a
person remains a party in interest or fiduciary. Thus, in the preceding
example, since an employer is a party in interest, the investment
adviser remains a party in interest with respect to a plan covering its
employees.
The Department of Labor emphasized that an investment adviser,
principal underwriter or investment company which is a fiduciary by
virtue of section 3(21)(A) of the Act is subject to the fiduciary
responsibility provisions of part 4 of title I of the Act, including
those relating to fiduciary duties under section 404.
[40 FR 31599, July 28, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]
