UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

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The Honorable Olena Berg
 

Assistant Secreta 

Pension and Welfare Benefit Adminstration 

United States Department of Labor 

200 Constitution Avenue, N.W. 

Washington, D.C. 20210 

Dear Ms. Berg: 

You have asked for our advice with respect to the status under the Investment 

Advisers Act of 1940 ("Advisers Act") of employer sponsors of defined contribution plans 

that provide certain types of investment-related inormation to employees who are 

participants in those plans. This question arses in the context of a draft Interpretive 

Bulletin (the "Bulletin") being prepared by the Deparment of Labor ("Department"), which 

describes various categories of investment-related inormation that employer sponsors may 

provide to their employees, and concludes that the information does not constitute 

"investment advice" as defined in the Employee Retirement Income Security Act of 1974 

("ERISA") and the rules thereunder. We understand that, if the inormation provided by the

employer is deemed not to be investment advice, the employer would not be subject to the 

fiduciary standards imposed under ERISA by reason of providing that inormation to 

participants in a paricipant-directed defined contribution plan. You have asked us to 

confir that employers that provide their employees with investment inormation of the type
 

described in the Bulletin would not be subject to registration or regulation under the 

Advisers Act. 

Registration and regulation under the Advisers Act is applicable to any person whose 

activity causes the person to meet the Act's definition of "investment adviser," unless the 

person qualifies for an exemption. Section 202(a)(1l) of the Advisers Act defines 

investment adviser as "any person who, for compensation, engages in the business of 

advising others, either directly or through publications or writings, as to the value of 

securities or as to the advisabilty of investing in, purchasing, or sellg securities. . . ." To
 

meet the defintion of investment adviser, therefore, a person must meet three requirements: 

(i) the person must provide advice, or issue reports or analyses, regarding securities; (ü) the person must be in the business of providing those services; and (il) the person must provide the services for compensation. ' The employer-employee relationship is unle the commercial relationship between an 

investment adviser and its client that the Advisers Act was intended to regulate. Employers 

that provide investment-related inormation to their employees about the employers' defined 

contribution plans typicaly do so not with a profit motive but in an attempt to educate those
 

employees about retirement plans and the investment alternatives available through those 

plans. These employers are typically not "in the business" of providing investment advice to 

their employees. Rather, an employer generaly engages in such activities to provide a 

service to its employees. In light of the employer-employee relationship, we believe that an 
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employer sponsor that provides investment inormation to employees who paricipate in its 

defined contribution plan would not be "in the business" of providing investment advice, 

unless it (i) holds itself out to the public as one who provides investment advice; or (ü) 

receives separate or additional compensation from employees or thid paries that represents 

a clearly definable charge for providing advice about securities. 1/ Thus, in our view, an 

employer that provides investment-related information to its employees who paricipate in the 

employer's participant-directed defined contribution plan would not, as a result, be in the 

business of providing investment advice and therefore would not be an "investment adviser"
 

as defined in the Advisers Act. 2.1 Such an employer would not be required to register or be 

subject to regulation under the Advisers Act. Our analysis in this regard is not affected by 

the nature of the investment inormation provided by the employer. 'J/ -

'We appreciate the opportnity to provide guidance to sponsors of employee benefit
 

plans that maybe concerned about their status under the Advisers Act. Questions regarding 

the issues raised in this letter may be directed to me or to Amy R. Doberman, Assistant 

Chief Counsel of the Division of Investment Management, at (202) 942-0660. 

Sinccrcly, _
 

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-Jack w. Muiphy )

Associate Director 

(Chief Counsel) 

1/ In this context, an employer would not be deemed to receive separate or additional


compensation if the provision of investment inormation merely provides it with 

intagible benefits, such as the abilty to attract and retain satisfied employees.
 

2/ As indicated above, this position would not apply to an employer that holds itself out


to the public as one that provides investment advice, or to an employer that receives 

separate or additional compensation for providing investment advice. 

'J./ We note, however, that cert types of investment inormation described in the


Bulletin may not constitute investment advice under the Advisers Act.
 

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