State Street Corporation Page 1 

David C. Phelan 

Executive Vice President and General 

Counsel 

State Street Corporation 

State Street Financial Center 

One Lincoln Street 

Boston, MA 02111-2900 

Telephone: 617.664.1783 

dcphelan@statestreet.com 

February 3, 2011 

Via e-mail: e-ORI@dol.gov

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Attn: Definition of Fiduciary Proposed Rule 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Re: RIN 1210-AB32, Definition of Fiduciary Proposed Rule

Dear Sir or Madam: 

State Street Corporation1

 (“State Street”) appreciates the opportunity to submit comments on the 

Department of Labor’s proposed rule (RIN 1210-AB32) relating to the definition of the term “fiduciary” 

under ERISA (the “Proposed Rule”) and, in particular, redefining what constitutes “investment advice” 

for purposes of that definition. 

 As of December 31, 2010, State Street provided custodial/directed trustee services with respect 

to more than $21.5 trillion of institutional assets, including more than $764 billion of “plan assets” of 

employee benefit plans that are subject to Title I of ERISA (“ERISA Plans”). In addition, State Street 

provides a wide variety of other services and products to institutional clients, including many ERISA 

Plans. 

State Street believes the Proposed Rule, while intended to address legitimate concerns, is overly 

broad and ambiguous. Overall, we agree with and support the detailed comment letters submitted by the 

American Benefits Council and other industry associations. Our purpose in this letter is to highlight a 

 

1

With $21.5 trillion in assets under custody and administration and $2.0 trillion in assets under management at December 31, 

2010, State Street is a leading specialist in meeting the needs of institutional investors worldwide. Our customers include mutual 

funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, 

foundations, endowments and investment managers. Including the United States, we operate in 26 countries and more than 100 

geographic markets worldwide. 
State Street Corporation Page 2 

specific issue with respect to the Proposed Rule that is relevant to providers of custody and institutional 

trustee services and their ERISA clients. 

As custodian or directed trustee, we frequently report valuations to ERISA Plans, which are 

intended and understood by our clients to be ministerial in nature and not investment advice. Under this 

service, we receive pricing feeds from various pricing services and use those prices to prepare reports for 

our clients and calculations of the aggregate portfolio values. The clients do not retain us to exercise any 

judgment as to the valuations being provided by the pricing services or any advice with regard to the 

purchase, retention or sale of the priced securities. The pricing vendors used under this service are 

established pricing vendors and are used on a fully disclosed basis to the underlying plans. 

The proposed expansion of the definition of “investment advice” to include “advice, or an 

appraisal or fairness opinion, concerning the value of securities or other property” creates an ambiguity 

whether a service of this nature is within the scope of the definition. While clearly not within the plain 

meaning of investment advice, the language used in the Proposed Rule raises concerns for State Street 

and other custodians that all services that relate to valuation, whether substantive or ministerial, may be 

treated as investment advice. This concern is only heightened by the limited exception in the Proposed 

Rule for reporting valuations, which is only available for reporting required to comply with regulatory 

requirements, and which is unavailable for values of assets for which there is not a generally recognized 

market, and which serve as a basis on which a plan may make distributions. As drafted, this exception 

appears to exclude (and therefore deem a fiduciary activity) numerous typical ministerial functions 

performed by custodians and directed trustees. 

The inclusion of values of plan assets in the reports that a custodian/directed trustee generates 

with respect to an ERISA Plan is a ministerial and administrative function that should not give rise to 

fiduciary status, even if that report is provided for purposes other than regulatory compliance or includes 

valuations of assets for which there is not a generally recognized market. Accordingly, State Street 

requests that the Department revise the final rule to make it clear that the mere inclusion by a 

custodian/directed trustee of the value of a security or other property in a report or any other 

communication to a plan sponsor, plan fiduciary or plan participant (or an agent or representative of any 

of the foregoing) does not constitute investment advice as long as: 

 (i) such value relates to an asset for which there is a generally recognized market, 

(ii) such value has been provided to the custodian/directed trustee by a third-party pricing 

service, on a basis that is not individualized to the particular ERISA Plan, or 

(iii) such value has been provided to the custodian/directed trustee by a fiduciary of the ERISA 

Plan or by a person designated by such a fiduciary for that purpose (e.g., an investment 

manager, an appraiser, a swap counterparty or the manager, general partner, trustee, etc. of 

an entity in which such ERISA Plan holds an interest, regardless of whether the underlying 

assets of such entity are plan assets). 

In each of the foregoing situations, the custodian/directed trustee is merely utilizing and reporting 

a value as to which it has not exercised any subjective judgment. 

In the case of assets for which there is a generally recognized market, the market price will 

determine the value of the asset. 
State Street Corporation Page 3 

In the case of a value provided by a pricing service, the value will have been generated by the 

pricing service for general use by many parties; it will not be individualized to the needs or specific facts 

and circumstances of any particular ERISA Plan and should not be viewed as advice to a plan fiduciary. 

The relevant plan fiduciary can accept or reject any such general valuation that has been made available 

to it and may seek, and direct the custodian/directed trustee to utilize, an alternative valuation from 

another source. In addition, depending upon the asset class, State Street generally proposes a standard list 

of pricing vendors to be used with respect to the ERISA Plan, but allows the fiduciary to the ERISA Plan 

to select alternative pricing vendors. 

In the case of a value provided by a plan fiduciary or another person designated by a plan 

fiduciary for the purpose, the utilization of such value by the custodian/directed trustee is clearly a 

ministerial, administrative function and should not constitute a fiduciary action. 

Without the changes suggested above, the Proposed Rule will require custodians and directed 

trustees to significantly alter the services they provide to ERISA Plans, to the detriment of plan sponsors 

and participants. For many asset classes, and particularly for hard-to-value securities, the custodian or 

directed trustee has neither the resources nor expertise to provide valuations, and would not be in a 

position to assume the fiduciary duty which could result from the Proposed Rule. As a result, custodians 

or directed trustees would likely be placed in the position of eliminating reporting of valuations of such 

securities, requiring plan sponsors to develop alternative reporting systems for such assets, or 

significantly increasing the cost of custody or directed trustee services in order to establish sufficient 

expertise in validating valuations and managing this new fiduciary function. Custodians and directed 

trustees would have to evaluate the feasibility from a risk and cost perspective of continuing to offer 

various analytics and risk reporting services to plans with hard-to-value securities, as well as their ability 

to even hold such assets as a custodian or directed trustee; changes to the current service model such as 

these would have detrimental impact and result in increased complexity and costs for plan sponsors in 

administering ERISA Plans. 

Since the relevant plan fiduciary is already responsible for monitoring these valuations, placing 

this new fiduciary duty on custodians and directed trustees is redundant, unnecessary, and, given the 

inevitable cost implications, not in the best interests of ERISA Plans or plan participants. 

State Street appreciates the opportunity to comment on the Proposed Rule. Please feel free to 

contact me with any questions. 

Sincerely, 

David C. Phelan 

cc: Jeffrey N. Carp, State Street Corporation, EVP and Chief Legal Officer 

Stefan M. Gavell, State Street Corporation, EVP and Head of 

Regulatory, Industry and Government Affairs