485 
provisions of this subsection and of subsection 
(b)(14) have been met. A transaction prohibited 
under section 406 shall not be considered to have oc-
curred solely because the records are lost or de-
stroyed prior to the end of the 6-year period due to 
circumstances beyond the control of the fiduciary 
adviser. 
‘‘(10) EXEMPTION
FOR
PLAN
SPONSOR
AND 
CERTAIN OTHER FIDUCIARIES.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a plan sponsor or other person who 
is a fiduciary (other than a fiduciary adviser) 
shall not be treated as failing to meet the re-
quirements of this part solely by reason of the 
provision of investment advice referred to in 
section 3(21)(A)(ii) (or solely by reason of con-
tracting for or otherwise arranging for the pro-
vision of the advice), if— 
‘‘(i) the advice is provided by a fidu-
ciary adviser pursuant to an eligible invest-
ment advice arrangement between the plan 
sponsor or other fiduciary and the fidu-
ciary adviser for the provision by the fidu-
ciary adviser of investment advice referred 
to in such section, 
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ccoleman on PROD1PC71 with BILLS
486 
‘‘(ii) the terms of the eligible invest-
ment advice arrangement require compli-
ance by the fiduciary adviser with the re-
quirements of this subsection, and 
‘‘(iii) the terms of the eligible invest-
ment advice arrangement include a written 
acknowledgment by the fiduciary adviser 
that the fiduciary adviser is a fiduciary of 
the plan with respect to the provision of 
the advice. 
‘‘(B) CONTINUED DUTY OF PRUDENT SE-
LECTION OF ADVISER AND PERIODIC REVIEW.— 
Nothing in subparagraph (A) shall be construed 
to exempt a plan sponsor or other person who 
is a fiduciary from any requirement of this part 
for the prudent selection and periodic review of 
a fiduciary adviser with whom the plan sponsor 
or other person enters into an eligible invest-
ment advice arrangement for the provision of 
investment 
advice 
referred 
to 
in 
section 
3(21)(A)(ii). The plan sponsor or other person 
who is a fiduciary has no duty under this part 
to monitor the specific investment advice given 
by the fiduciary adviser to any particular recipi-
ent of the advice. 
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ccoleman on PROD1PC71 with BILLS
487 
‘‘(C) AVAILABILITY OF PLAN ASSETS FOR 
PAYMENT FOR ADVICE.—Nothing in this part 
shall be construed to preclude the use of plan 
assets to pay for reasonable expenses in pro-
viding investment advice referred to in section 
3(21)(A)(ii). 
‘‘(11) DEFINITIONS.—For purposes of this sub-
section and subsection (b)(14)— 
‘‘(A) FIDUCIARY ADVISER.—The term ‘fi-
duciary adviser’ means, with respect to a plan, 
a person who is a fiduciary of the plan by rea-
son of the provision of investment advice re-
ferred to in section 3(21)(A)(ii) by the person 
to the participant or beneficiary of the plan and 
who is— 
‘‘(i) registered as an investment ad-
viser under the Investment Advisers Act of 
1940 (15 U.S.C. 80b–1 et seq.) or under 
the laws of the State in which the fiduciary 
maintains its principal office and place of 
business, 
‘‘(ii) a bank or similar financial insti-
tution referred to in section 408(b)(4) or a 
savings association (as defined in section 
3(b)(1) of the Federal Deposit Insurance 
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ccoleman on PROD1PC71 with BILLS
488 
Act (12 U.S.C. 1813(b)(1)), but only if the 
advice is provided through a trust depart-
ment of the bank or similar financial insti-
tution or savings association which is sub-
ject to periodic examination and review by 
Federal or State banking authorities, 
‘‘(iii) an insurance company qualified 
to do business under the laws of a State, 
‘‘(iv) a person registered as a broker 
or dealer under the Securities Exchange 
Act of 1934 (15 U.S.C. 78a et seq.), 
‘‘(v) an affiliate of a person described 
in any of clauses (i) through (iv), or 
‘‘(vi) an employee, agent, or registered 
representative of a person described in 
clauses (i) through (v) who satisfies the re-
quirements of applicable insurance, bank-
ing, and securities laws relating to the pro-
vision of the advice. 
For purposes of this part, a person who devel-
ops the computer model described in paragraph 
(3)(B) or markets the investment advice pro-
gram or computer model shall be treated as a 
person who is a fiduciary of the plan by reason 
of the provision of investment advice referred to 
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ccoleman on PROD1PC71 with BILLS
489 
in section 3(21)(A)(ii) to the participant or ben-
eficiary and shall be treated as a fiduciary ad-
viser for purposes of this subsection and sub-
section (b)(14), except that the Secretary may 
prescribe rules under which only 1 fiduciary ad-
viser may elect to be treated as a fiduciary with 
respect to the plan. 
‘‘(B) AFFILIATE.—The term ‘affiliate’ of 
another entity means an affiliated person of the 
entity (as defined in section 2(a)(3) of the In-
vestment Company Act of 1940 (15 U.S.C. 
80a-2(a)(3))). 
‘‘(C) 
REGISTERED
REPRESENTATIVE.— 
The term ‘registered representative’ of another 
entity means a person described in section 
3(a)(18) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(18)) (substituting the 
entity for the broker or dealer referred to in 
such section) or a person described in section 
202(a)(17) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-2(a)(17)) (substituting 
the entity for the investment adviser referred to 
in such section).’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to advice 
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ccoleman on PROD1PC71 with BILLS
490 
referred to in section 3(21)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 provided 
after December 31, 2006. 
(b) AMENDMENTS TO INTERNAL REVENUE CODE OF 
1986.— 
(1) EXEMPTION
FROM
PROHIBITED
TRANS-
ACTIONS.—Subsection (d) of section 4975 of the In-
ternal Revenue Code of 1986 (relating to exemption 
from tax on prohibited transactions) is amended— 
(A) in paragraph (15), by striking ‘‘or’’ at 
the end; 
(B) in paragraph (16), by striking the pe-
riod at the end and inserting ‘‘;or’’; and 
(C) by adding at the end the following new 
paragraph: 
‘‘(17) Any transaction in connection with the 
provision of investment advice described in sub-
section (e)(3)(B) to a participant or beneficiary in a 
plan and that permits such participant or bene-
ficiary to direct the investment of plan assets in an 
individual account, if— 
‘‘(A) the transaction is— 
‘‘(i) the provision of the investment 
advice to the participant or beneficiary of 
the plan with respect to a security or other 
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ccoleman on PROD1PC71 with BILLS
491 
property available as an investment under 
the plan, 
‘‘(ii) the acquisition, holding, or sale 
of a security or other property available as 
an investment under the plan pursuant to 
the investment advice, or 
‘‘(iii) the direct or indirect receipt of 
fees or other compensation by the fiduciary 
adviser or an affiliate thereof (or any em-
ployee, agent, or registered representative 
of the fiduciary adviser or affiliate) in con-
nection with the provision of the advice or 
in connection with an acquisition, holding, 
or sale of a security or other property 
available as an investment under the plan 
pursuant to the investment advice; and 
‘‘(B) the requirements of subsection (f)(8) 
are met.’’. 
(2) REQUIREMENTS.—Subsection (f) of such 
section 4975 (relating to other definitions and spe-
cial rules) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(8) PROVISION
OF
INVESTMENT
ADVICE
TO 
PARTICIPANT AND BENEFICIARIES.— 
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ccoleman on PROD1PC71 with BILLS
492 
‘‘(A) IN GENERAL.—The prohibitions pro-
vided in subsection (c) shall not apply to trans-
actions described in subsection (b)(14) if the in-
vestment advice provided by a fiduciary adviser 
is provided under an eligible investment advice 
arrangement. 
‘‘(B) ELIGIBLE INVESTMENT ADVICE AR-
RANGEMENT.—For purposes of this paragraph, 
the term ‘eligible investment advice arrange-
ment’ means an arrangement— 
‘‘(i) which either— 
‘‘(I) provides that any fees (in-
cluding any commission or other com-
pensation) received by the fiduciary 
adviser for investment advice or with 
respect to the sale, holding, or acqui-
sition of any security or other prop-
erty for purposes of investment of 
plan assets do not vary depending on 
the basis of any investment option se-
lected, or 
‘‘(II) uses a computer model 
under an investment advice program 
meeting the requirements of subpara-
graph (C) in connection with the pro-
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ccoleman on PROD1PC71 with BILLS
493 
vision of investment advice by a fidu-
ciary adviser to a participant or bene-
ficiary, and 
‘‘(ii) with respect to which the re-
quirements of subparagraphs (D), (E), 
(F), (G), (H), and (I) are met. 
‘‘(C) 
INVESTMENT
ADVICE
PROGRAM 
USING COMPUTER MODEL.— 
‘‘(i) IN GENERAL.—An investment ad-
vice program meets the requirements of 
this subparagraph if the requirements of 
clauses (ii), (iii), and (iv) are met. 
‘‘(ii) COMPUTER
MODEL.—The re-
quirements of this clause are met if the in-
vestment advice provided under the invest-
ment advice program is provided pursuant 
to a computer model that— 
‘‘(I) applies generally accepted 
investment theories that take into ac-
count the historic returns of different 
asset classes over defined periods of 
time, 
‘‘(II) utilizes relevant information 
about the participant, which may in-
clude age, life expectancy, retirement 
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ccoleman on PROD1PC71 with BILLS
494 
age, risk tolerance, other assets or 
sources of income, and preferences as 
to certain types of investments, 
‘‘(III) utilizes prescribed objective 
criteria to provide asset allocation 
portfolios comprised of investment op-
tions available under the plan, 
‘‘(IV) operates in a manner that 
is not biased in favor of investments 
offered by the fiduciary adviser or a 
person with a material affiliation or 
contractual relationship with the fidu-
ciary adviser, and 
‘‘(V) takes into account all in-
vestment options under the plan in 
specifying how a participant’s account 
balance should be invested and is not 
inappropriately weighted with respect 
to any investment option. 
‘‘(iii) CERTIFICATION.— 
‘‘(I) IN GENERAL.—The require-
ments of this clause are met with re-
spect to any investment advice pro-
gram if an eligible investment expert 
certifies, prior to the utilization of the 
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ccoleman on PROD1PC71 with BILLS
495 
computer model and in accordance 
with rules prescribed by the Secretary 
of Labor, that the computer model 
meets the requirements of clause (ii). 
‘‘(II) RENEWAL
OF
CERTIFI-
CATIONS.—If, as determined under 
regulations prescribed by the Sec-
retary of Labor, there are material 
modifications to a computer model, 
the requirements of this clause are 
met only if a certification described in 
subclause (I) is obtained with respect 
to the computer model as so modified. 
‘‘(III) 
ELIGIBLE
INVESTMENT 
EXPERT.—The term ‘eligible invest-
ment expert’ means any person which 
meets such requirements as the Sec-
retary of Labor may provide and 
which does not bear any material af-
filiation or contractual relationship 
with any investment adviser or a re-
lated person thereof (or any employee, 
agent, or registered representative of 
the investment adviser or related per-
son). 
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ccoleman on PROD1PC71 with BILLS
496 
‘‘(iv) EXCLUSIVITY OF RECOMMENDA-
TION.—The requirements of this clause are 
met with respect to any investment advice 
program if— 
‘‘(I) the only investment advice 
provided under the program is the ad-
vice generated by the computer model 
described in clause (ii), and 
‘‘(II) any transaction described in 
subsection (b)(14)(B)(ii) occurs solely 
at the direction of the participant or 
beneficiary. 
Nothing in the preceding sentence shall 
preclude the participant or beneficiary 
from requesting investment advice other 
than that described in clause (i), but only 
if such request has not been solicited by 
any person connected with carrying out the 
arrangement. 
‘‘(D) EXPRESS AUTHORIZATION BY SEPA-
RATE
FIDUCIARY.—The requirements of this 
subparagraph are met with respect to an ar-
rangement if the arrangement is expressly au-
thorized by a plan fiduciary other than the per-
son offering the investment advice program, any 
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ccoleman on PROD1PC71 with BILLS
497 
person providing investment options under the 
plan, or any affiliate of either. 
‘‘(E) AUDITS.— 
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if an inde-
pendent auditor, who has appropriate tech-
nical training or experience and proficiency 
and so represents in writing— 
‘‘(I) conducts an annual audit of 
the arrangement for compliance with 
the requirements of this paragraph, 
and 
‘‘(II) following completion of the 
annual audit, issues a written report 
to the fiduciary who authorized use of 
the arrangement which presents its 
specific findings regarding compliance 
of the arrangement with the require-
ments of this paragraph. 
‘‘(ii) SPECIAL RULE FOR INDIVIDUAL 
RETIREMENT AND SIMILAR PLANS.—In the 
case of a plan described in subparagraphs 
(B) through (F) (and so much of subpara-
graph (G) as relates to such subpara-
graphs) of subsection (e)(1), in lieu of the 
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ccoleman on PROD1PC71 with BILLS
498 
requirements of clause (i), audits of the ar-
rangement shall be conducted at such 
times and in such manner as the Secretary 
of Labor may prescribe. 
‘‘(iii) INDEPENDENT
AUDITOR.—For 
purposes of this subparagraph, an auditor 
is considered independent if it is not re-
lated to the person offering the arrange-
ment to the plan and is not related to any 
person providing investment options under 
the plan. 
‘‘(F) DISCLOSURE.—The requirements of 
this subparagraph are met if— 
‘‘(i) the fiduciary adviser provides to a 
participant or a beneficiary before the ini-
tial provision of the investment advice with 
regard to any security or other property of-
fered as an investment option, a written 
notification (which may consist of notifica-
tion by means of electronic communica-
tion)— 
‘‘(I) of the role of any party that 
has a material affiliation or contrac-
tual relationship with the financial ad-
viser in the development of the invest-
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ccoleman on PROD1PC71 with BILLS
499 
ment advice program and in the selec-
tion of investment options available 
under the plan, 
‘‘(II) of the past performance 
and historical rates of return of the 
investment options available under the 
plan, 
‘‘(III) of all fees or other com-
pensation relating to the advice that 
the fiduciary adviser or any affiliate 
thereof is to receive (including com-
pensation provided by any third 
party) in connection with the provi-
sion of the advice or in connection 
with the sale, acquisition, or holding 
of the security or other property, 
‘‘(IV) of any material affiliation 
or contractual relationship of the fidu-
ciary adviser or affiliates thereof in 
the security or other property, 
‘‘(V) the manner, and under 
what circumstances, any participant 
or beneficiary information provided 
under the arrangement will be used or 
disclosed, 
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ccoleman on PROD1PC71 with BILLS
500 
‘‘(VI) of the types of services 
provided by the fiduciary adviser in 
connection with the provision of in-
vestment advice by the fiduciary ad-
viser, 
‘‘(VII) that the adviser is acting 
as a fiduciary of the plan in connec-
tion with the provision of the advice, 
and 
‘‘(VIII) that a recipient of the 
advice may separately arrange for the 
provision of advice by another adviser, 
that could have no material affiliation 
with and receive no fees or other com-
pensation in connection with the secu-
rity or other property, and 
‘‘(ii) at all times during the provision 
of advisory services to the participant or 
beneficiary, the fiduciary adviser— 
‘‘(I) maintains the information 
described in clause (i) in accurate 
form and in the manner described in 
subparagraph (H), 
‘‘(II) provides, without charge, 
accurate information to the recipient 
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ccoleman on PROD1PC71 with BILLS
501 
of the advice no less frequently than 
annually, 
‘‘(III) provides, without charge, 
accurate information to the recipient 
of the advice upon request of the re-
cipient, and 
‘‘(IV) provides, without charge, 
accurate information to the recipient 
of the advice concerning any material 
change to the information required to 
be provided to the recipient of the ad-
vice at a time reasonably contempora-
neous to the change in information. 
‘‘(G) OTHER
CONDITIONS.—The require-
ments of this subparagraph are met if— 
‘‘(i) the fiduciary adviser provides ap-
propriate disclosure, in connection with the 
sale, acquisition, or holding of the security 
or other property, in accordance with all 
applicable securities laws, 
‘‘(ii) the sale, acquisition, or holding 
occurs solely at the direction of the recipi-
ent of the advice, 
‘‘(iii) the compensation received by the 
fiduciary adviser and affiliates thereof in 
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ccoleman on PROD1PC71 with BILLS
502 
connection with the sale, acquisition, or 
holding of the security or other property is 
reasonable, and 
‘‘(iv) the terms of the sale, acquisi-
tion, or holding of the security or other 
property are at least as favorable to the 
plan as an arm’s length transaction would 
be. 
‘‘(H) STANDARDS FOR PRESENTATION OF 
INFORMATION.— 
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if the notifi-
cation required to be provided to partici-
pants and beneficiaries under subpara-
graph (F)(i) is written in a clear and con-
spicuous manner and in a manner cal-
culated to be understood by the average 
plan participant and is sufficiently accu-
rate and comprehensive to reasonably ap-
prise such participants and beneficiaries of 
the information required to be provided in 
the notification. 
‘‘(ii) MODEL FORM FOR DISCLOSURE 
OF
FEES
AND
OTHER
COMPENSATION.— 
The Secretary of Labor shall issue a model 
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ccoleman on PROD1PC71 with BILLS
503 
form for the disclosure of fees and other 
compensation required in subparagraph 
(F)(i)(III) which meets the requirements 
of clause (i). 
‘‘(I) MAINTENANCE FOR 6 YEARS OF EVI-
DENCE OF COMPLIANCE.—The requirements of 
this subparagraph are met if a fiduciary adviser 
who has provided advice referred to in subpara-
graph (A) maintains, for a period of not less 
than 6 years after the provision of the advice, 
any records necessary for determining whether 
the requirements of the preceding provisions of 
this paragraph and of subsection (d)(17) have 
been met. A transaction prohibited under sec-
tion 406 shall not be considered to have oc-
curred solely because the records are lost or de-
stroyed prior to the end of the 6-year period 
due to circumstances beyond the control of the 
fiduciary adviser. 
‘‘(J) DEFINITIONS.—For purposes of this 
paragraph and subsection (d)(17)— 
‘‘(i) FIDUCIARY ADVISER.—The term 
‘fiduciary adviser’ means, with respect to a 
plan, a person who is a fiduciary of the 
plan by reason of the provision of invest-
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ccoleman on PROD1PC71 with BILLS
504 
ment advice by the person to the partici-
pant or beneficiary of the plan and who 
is— 
‘‘(I) registered as an investment 
adviser under the Investment Advisers 
Act of 1940 (15 U.S.C. 80b–1 et seq.) 
or under the laws of the State in 
which the fiduciary maintains its prin-
cipal office and place of business, 
‘‘(II) a bank or similar financial 
institution referred to in section 
408(b)(4) or a savings association (as 
defined in section 3(b)(1) of the Fed-
eral Deposit Insurance Act (12 U.S.C. 
1813(b)(1)), but only if the advice is 
provided through a trust department 
of the bank or similar financial insti-
tution or savings association which is 
subject to periodic examination and 
review by Federal or State banking 
authorities, 
‘‘(III) an insurance company 
qualified to do business under the 
laws of a State, 
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ccoleman on PROD1PC71 with BILLS
505 
‘‘(IV) a person registered as a 
broker or dealer under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a 
et seq.), 
‘‘(V) an affiliate of a person de-
scribed in any of subclauses (I) 
through (IV), or 
‘‘(VI) an employee, agent, or reg-
istered representative of a person de-
scribed in subclauses (I) through (V) 
who satisfies the requirements of ap-
plicable insurance, banking, and secu-
rities laws relating to the provision of 
the advice. 
For purposes of this title, a person who de-
velops the computer model described in 
subparagraph (C)(ii) or markets the in-
vestment advice program or computer 
model shall be treated as a person who is 
a fiduciary of the plan by reason of the 
provision of investment advice referred to 
in subsection (e)(3)(B) to the participant 
or beneficiary and shall be treated as a fi-
duciary adviser for purposes of this para-
graph and subsection (d)(17), except that 
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ccoleman on PROD1PC71 with BILLS
506 
the Secretary of Labor may prescribe rules 
under which only 1 fiduciary adviser may 
elect to be treated as a fiduciary with re-
spect to the plan. 
‘‘(ii) AFFILIATE.—The term ‘affiliate’ 
of another entity means an affiliated per-
son of the entity (as defined in section 
2(a)(3) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(3))). 
‘‘(iii) 
REGISTERED
REPRESENTA-
TIVE.—The term ‘registered representa-
tive’ of another entity means a person de-
scribed in section 3(a)(18) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 
78c(a)(18)) (substituting the entity for the 
broker or dealer referred to in such sec-
tion) or a person described in section 
202(a)(17) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b-2(a)(17)) (sub-
stituting the entity for the investment ad-
viser referred to in such section).’’. 
(3) DETERMINATION OF FEASIBILITY OF APPLI-
CATION OF COMPUTER MODEL INVESTMENT ADVICE 
PROGRAMS FOR INDIVIDUAL RETIREMENT AND SIMI-
LAR PLANS.— 
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ccoleman on PROD1PC71 with BILLS
507 
(A) SOLICITATION OF INFORMATION.—As 
soon as practicable after the date of the enact-
ment of this Act, the Secretary of Labor, in 
consultation with the Secretary of the Treasury, 
shall— 
(i) solicit information as to the feasi-
bility of the application of computer model 
investment advice programs for plans de-
scribed in subparagraphs (B) through (F) 
(and so much of subparagraph (G) as re-
lates to such subparagraphs) of section 
4975(e)(1) of the Internal Revenue Code 
of 1986, including soliciting information 
from— 
(I) at least the top 50 trustees of 
such plans, determined on the basis of 
assets held by such trustees, and 
(II) other persons offering com-
puter model investment advice pro-
grams based on nonproprietary prod-
ucts, and 
(ii) shall on the basis of such informa-
tion make the determination under sub-
paragraph (B). 
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508 
The information solicited by the Secretary of 
Labor under clause (i) from persons described 
in subclauses (I) and (II) of clause (i) shall in-
clude information on computer modeling capa-
bilities of such persons with respect to the cur-
rent year and preceding year, including such ca-
pabilities for investment accounts maintained 
by such persons. 
(B) DETERMINATION
OF
FEASIBILITY.— 
The Secretary of Labor, in consultation with 
the Secretary of the Treasury, shall, on the 
basis of information received under subpara-
graph (A), determine whether there is any com-
puter model investment advice program which 
may be utilized by a plan described in subpara-
graph (A)(i) to provide investment advice to the 
account beneficiary of the plan which— 
(i) utilizes relevant information about 
the account beneficiary, which may include 
age, life expectancy, retirement age, risk 
tolerance, other assets or sources of in-
come, and preferences as to certain types 
of investments, 
(ii) takes into account the full range 
of investments, including equities and 
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ccoleman on PROD1PC71 with BILLS
509 
bonds, in determining the options for the 
investment portfolio of the account bene-
ficiary, and 
(iii) allows the account beneficiary, in 
directing the investment of assets, suffi-
cient flexibility in obtaining advice to 
evaluate and select investment options. 
The Secretary of Labor shall report the results 
of such determination to the committees of 
Congress referred to in subparagraph (D)(ii) 
not later than December 31, 2007. 
(C) APPLICATION
OF
COMPUTER
MODEL 
INVESTMENT ADVICE PROGRAM.— 
(i) CERTIFICATION
REQUIRED
FOR 
USE OF COMPUTER MODEL.— 
(I) RESTRICTION ON USE.—Sub-
clause (II) of section 4975(f)(8)(B)(i) 
of the Internal Revenue Code of 1986 
shall not apply to a plan described in 
subparagraph (A)(i). 
(II) RESTRICTION
LIFTED
IF 
MODEL CERTIFIED.—If the Secretary 
of Labor determines under subpara-
graph (B) or (D) that there is a com-
puter model investment advice pro-
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ccoleman on PROD1PC71 with BILLS
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gram described in subparagraph (B), 
subclause (I) shall cease to apply as of 
the date of such determination. 
(ii) CLASS EXEMPTION IF NO INITIAL 
CERTIFICATION
BY
SECRETARY.—If the 
Secretary of Labor determines under sub-
paragraph (B) that there is no computer 
model investment advice program described 
in subparagraph (B), the Secretary of 
Labor shall grant a class exemption from 
treatment as a prohibited transaction 
under section 4975(c) of the Internal Rev-
enue Code of 1986 to any transaction de-
scribed in section 4975(d)(17)(A) of such 
Code with respect to plans described in 
subparagraph (A)(i), subject to such condi-
tions as set forth in such exemption as are 
in the interests of the plan and its account 
beneficiary and protective of the rights of 
the account beneficiary and as are nec-
essary to— 
(I) ensure the requirements of 
sections 4975(d)(17) and 4975(f)(8) 
(other than subparagraph (C) thereof) 
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ccoleman on PROD1PC71 with BILLS
511 
of the Internal Revenue Code of 1986 
are met, and 
(II) ensure the investment advice 
provided under the investment advice 
program utilizes prescribed objective 
criteria to provide asset allocation 
portfolios comprised of securities or 
other property available as invest-
ments under the plan. 
If the Secretary of Labor solicits any infor-
mation under subparagraph (A) from a 
person and such person does not provide 
such information within 60 days after the 
solicitation, then, unless such failure was 
due to reasonable cause and not wilful ne-
glect, such person shall not be entitled to 
utilize the class exemption under this 
clause. 
(D) SUBSEQUENT DETERMINATION.— 
(i) IN GENERAL.—If the Secretary of 
Labor initially makes a determination de-
scribed in subparagraph (C)(ii), the Sec-
retary may subsequently determine that 
there is a computer model investment ad-
vice program described in subparagraph 
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512 
(B). If the Secretary makes such subse-
quent determination, then the class exemp-
tion described in subparagraph (C)(ii) shall 
cease to apply after the later of— 
(I) the date which is 2 years 
after such subsequent determination, 
or 
(II) the date which is 3 years 
after the first date on which such ex-
emption took effect. 
(ii) 
REQUESTS
FOR
DETERMINA-
TION.—Any person may request the Sec-
retary of Labor to make a determination 
under this subparagraph with respect to 
any computer model investment advice pro-
gram, and the Secretary of Labor shall 
make a determination with respect to such 
request within 90 days. If the Secretary of 
Labor makes a determination that such 
program is not described in subparagraph 
(B), the Secretary shall, within 10 days of 
such determination, notify the Committee 
on Ways and Means and the Committee on 
Education and the Workforce of the House 
of Representatives and the Committee on 
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ccoleman on PROD1PC71 with BILLS
513 
Finance and the Committee on Health, 
Education, Labor, and Pensions of the 
Senate of such determination and the rea-
sons for such determination. 
(E) EFFECTIVE DATE.—The provisions of 
this paragraph shall take effect on the date of 
the enactment of this Act. 
(4) EFFECTIVE DATE.—Except as provided in 
this subsection, the amendments made by this sub-
section shall apply with respect to advice referred to 
in section 4975(c)(3)(B) of the Internal Revenue 
Code of 1986 provided after December 31, 2006. 
(c) COORDINATION WITH EXISTING EXEMPTIONS.— 
Any exemption under section 408(b) of the Employee Re-
tirement Income Security Act of 1974 and section 4975(d) 
of the Internal Revenue Code of 1986 provided by the 
amendments made by this section shall not in any manner 
alter existing individual or class exemptions, provided by 
statute or administrative action. 
Subtitle B—Prohibited 
Transactions 
SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO 
FINANCIAL INVESTMENTS. 
(a) EXEMPTION FOR BLOCK TRADING.— 
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514 
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sec-
tion 601, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(15)(A) Any transaction involving the pur-
chase or sale of securities, or other property (as de-
termined by the Secretary), between a plan and a 
party in interest (other than a fiduciary described in 
section 3(21)(A)) with respect to a plan if— 
‘‘(i) the transaction involves a block trade, 
‘‘(ii) at the time of the transaction, the in-
terest of the plan (together with the interests of 
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade, 
‘‘(iii) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction, and 
‘‘(iv) the compensation associated with the 
purchase and sale is not greater than the com-
pensation associated with an arm’s length 
transaction with an unrelated party. 
‘‘(B) For purposes of this paragraph, the term 
‘block trade’ means any trade of at least 10,000 
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515 
shares or with a market value of at least $200,000 
which will be allocated across two or more unrelated 
client accounts of a fiduciary.’’. 
(2) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.— 
(A) IN GENERAL.—Subsection (d) of sec-
tion 4975 of the Internal Revenue Code of 1986 
(relating to exemptions), as amended by section 
601, is amended by striking ‘‘or’’ at the end of 
paragraph (16), by striking the period at the 
end of paragraph (17) and inserting ‘‘, or’’, and 
by adding at the end the following new para-
graph: 
‘‘(18) any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary of Labor), between a plan and a 
party in interest (other than a fiduciary described in 
subsection (e)(3)(B)) with respect to a plan if— 
‘‘(A) the transaction involves a block trade, 
‘‘(B) at the time of the transaction, the in-
terest of the plan (together with the interests of 
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade, 
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ccoleman on PROD1PC71 with BILLS
516 
‘‘(C) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction, and 
‘‘(D) the compensation associated with the 
purchase and sale is not greater than the com-
pensation associated with an arm’s length 
transaction with an unrelated party.’’. 
(B) SPECIAL RULE RELATING TO BLOCK 
TRADE.—Subsection (f) of section 4975 of such 
Code (relating to other definitions and special 
rules), as amended by section 601, is amended 
by adding at the end the following new para-
graph: 
‘‘(9) BLOCK TRADE.—The term ‘block trade’ 
means any trade of at least 10,000 shares or with 
a market value of at least $200,000 which will be al-
located across two or more unrelated client accounts 
of a fiduciary.’’. 
(b) BONDING RELIEF.—Section 412(a) of such Act 
(29 U.S.C. 1112(a)) is amended— 
(1) by redesignating paragraph (2) as para-
graph (3), 
(2) by striking ‘‘and’’ at the end of paragraph 
(1), and 
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517 
(3) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) no bond shall be required of any entity 
which is registered as a broker or a dealer under 
section 15(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o(b)) if the broker or dealer is 
subject to the fidelity bond requirements of a self- 
regulatory organization (within the meaning of sec-
tion 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’. 
(c) EXEMPTION FOR ELECTRONIC COMMUNICATION 
NETWORK.— 
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act, as amended by subsection (a), is amended 
by adding at the end the following: 
‘‘(16) Any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary), between a plan and a party in in-
terest if— 
‘‘(A) the transaction is executed through 
an electronic communication network, alter-
native trading system, or similar execution sys-
tem or trading venue subject to regulation and 
oversight by— 
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518 
‘‘(i) the applicable Federal regulating 
entity, or 
‘‘(ii) such foreign regulatory entity as 
the Secretary may determine by regulation, 
‘‘(B) either— 
‘‘(i) the transaction is effected pursu-
ant to rules designed to match purchases 
and sales at the best price available 
through the execution system in accord-
ance with applicable rules of the Securities 
and Exchange Commission or other rel-
evant governmental authority, or 
‘‘(ii) neither the execution system nor 
the parties to the transaction take into ac-
count the identity of the parties in the exe-
cution of trades, 
‘‘(C) the price and compensation associ-
ated with the purchase and sale are not greater 
than the price and compensation associated 
with an arm’s length transaction with an unre-
lated party, 
‘‘(D) if the party in interest has an owner-
ship interest in the system or venue described 
in subparagraph (A), the system or venue has 
been authorized by the plan sponsor or other 
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519 
independent fiduciary for transactions described 
in this paragraph, and 
‘‘(E) not less than 30 days prior to the ini-
tial transaction described in this paragraph exe-
cuted through any system or venue described in 
subparagraph (A), a plan fiduciary is provided 
written or electronic notice of the execution of 
such transaction through such system or 
venue.’’. 
(2) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—Subsection (d) of section 4975 of 
the Internal Revenue Code of 1986 (relating to ex-
emptions), as amended by subsection (a), is amend-
ed by striking ‘‘or’’ at the end of paragraph (17), by 
striking the period at the end of paragraph (18) and 
inserting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(19) any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary of Labor), between a plan and a 
party in interest if— 
‘‘(A) the transaction is executed through 
an electronic communication network, alter-
native trading system, or similar execution sys-
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ccoleman on PROD1PC71 with BILLS
520 
tem or trading venue subject to regulation and 
oversight by— 
‘‘(i) the applicable Federal regulating 
entity, or 
‘‘(ii) such foreign regulatory entity as 
the Secretary of Labor may determine by 
regulation, 
‘‘(B) either— 
‘‘(i) the transaction is effected pursu-
ant to rules designed to match purchases 
and sales at the best price available 
through the execution system in accord-
ance with applicable rules of the Securities 
and Exchange Commission or other rel-
evant governmental authority, or 
‘‘(ii) neither the execution system nor 
the parties to the transaction take into ac-
count the identity of the parties in the exe-
cution of trades, 
‘‘(C) the price and compensation associ-
ated with the purchase and sale are not greater 
than the price and compensation associated 
with an arm’s length transaction with an unre-
lated party, 
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521 
‘‘(D) if the party in interest has an owner-
ship interest in the system or venue described 
in subparagraph (A), the system or venue has 
been authorized by the plan sponsor or other 
independent fiduciary for transactions described 
in this paragraph, and 
‘‘(E) not less than 30 days prior to the ini-
tial transaction described in this paragraph exe-
cuted through any system or venue described in 
subparagraph (A), a plan fiduciary is provided 
written or electronic notice of the execution of 
such transaction through such system or 
venue.’’. 
(d) EXEMPTION FOR SERVICE PROVIDERS.— 
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1106), as amended by sub-
section (c), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(17)(A) Transactions described in subpara-
graphs (A), (B), and (D) of section 406(a)(1) be-
tween a plan and a person that is a party in interest 
other than a fiduciary (or an affiliate) who has or 
exercises any discretionary authority or control with 
respect to the investment of the plan assets involved 
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ccoleman on PROD1PC71 with BILLS
522 
in the transaction or renders investment advice 
(within the meaning of section 3(21)(A)(ii)) with re-
spect to those assets, solely by reason of providing 
services to the plan or solely by reason of a relation-
ship to such a service provider described in subpara-
graph (F), (G), (H), or (I) of section 3(14), or both, 
but only if in connection with such transaction the 
plan receives no less, nor pays no more, than ade-
quate consideration. 
‘‘(B) For purposes of this paragraph, the term 
‘adequate consideration’ means— 
‘‘(i) in the case of a security for which 
there is a generally recognized market— 
‘‘(I) the price of the security pre-
vailing on a national securities ex-
change which is registered under sec-
tion 6 of the Securities Exchange Act 
of 1934, taking into account factors 
such as the size of the transaction and 
marketability of the security, or 
‘‘(II) if the security is not traded 
on such a national securities ex-
change, a price not less favorable to 
the plan than the offering price for 
the security as established by the cur-
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ccoleman on PROD1PC71 with BILLS
523 
rent bid and asked prices quoted by 
persons independent of the issuer and 
of the party in interest, taking into 
account factors such as the size of the 
transaction and marketability of the 
security, and 
‘‘(ii) in the case of an asset other than 
a security for which there is a generally 
recognized market, the fair market value of 
the asset as determined in good faith by a 
fiduciary or fiduciaries in accordance with 
regulations prescribed by the Secretary.’’. 
(2) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.— 
(A) IN GENERAL.—Subsection (d) of sec-
tion 4975 of the Internal Revenue Code of 1986 
(relating to exemptions), as amended by sub-
section (c), is amended by striking ‘‘or’’ at the 
end of paragraph (18), by striking the period at 
the end of paragraph (19) and inserting ‘‘, or’’, 
and by adding at the end the following new 
paragraph: 
‘‘(20) transactions described in subparagraphs 
(A), (B), and (D) of subsection (c)(1) between a 
plan and a person that is a party in interest other 
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ccoleman on PROD1PC71 with BILLS
524 
than a fiduciary (or an affiliate) who has or exer-
cises any discretionary authority or control with re-
spect to the investment of the plan assets involved 
in the transaction or renders investment advice 
(within the meaning of subsection (e)(3)(B)) with 
respect to those assets, solely by reason of providing 
services to the plan or solely by reason of a relation-
ship to such a service provider described in subpara-
graph (F), (G), (H), or (I) of subsection (e)(2), or 
both, but only if in connection with such transaction 
the plan receives no less, nor pays no more, than 
adequate consideration.’’. 
(B) SPECIAL RULE RELATING TO SERVICE 
PROVIDERS.—Subsection (f) of section 4975 of 
such Code (relating to other definitions and 
special rules), as amended by subsection (a), is 
amended by adding at the end the following 
new paragraph: 
‘‘(10) ADEQUATE CONSIDERATION.—The term 
‘adequate consideration’ means— 
‘‘(A) in the case of a security for which 
there is a generally recognized market— 
‘‘(i) the price of the security pre-
vailing on a national securities exchange 
which is registered under section 6 of the 
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ccoleman on PROD1PC71 with BILLS
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Securities Exchange Act of 1934, taking 
into account factors such as the size of the 
transaction and marketability of the secu-
rity, or 
‘‘(ii) if the security is not traded on 
such a national securities exchange, a price 
not less favorable to the plan than the of-
fering price for the security as established 
by the current bid and asked prices quoted 
by persons independent of the issuer and 
of the party in interest, taking into ac-
count factors such as the size of the trans-
action and marketability of the security, 
and 
‘‘(B) in the case of an asset other than a 
security for which there is a generally recog-
nized market, the fair market value of the asset 
as determined in good faith by a fiduciary or fi-
duciaries in accordance with regulations pre-
scribed by the Secretary of Labor.’’. 
(e) RELIEF
FOR
FOREIGN
EXCHANGE
TRANS-
ACTIONS.— 
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sub-
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ccoleman on PROD1PC71 with BILLS
526 
section (d), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(18) FOREIGN
EXCHANGE
TRANSACTIONS.— 
Any foreign exchange transactions, between a bank 
or broker-dealer (or any affiliate of either), and a 
plan (as defined in section 3(3)) with respect to 
which such bank or broker-dealer (or affiliate) is a 
trustee, custodian, fiduciary, or other party in inter-
est, if— 
‘‘(A) the transaction is in connection with 
the purchase, holding, or sale of securities or 
other investment assets (other than a foreign 
exchange transaction unrelated to any other in-
vestment in securities or other investment as-
sets), 
‘‘(B) at the time the foreign exchange 
transaction is entered into, the terms of the 
transaction are not less favorable to the plan 
than the terms generally available in com-
parable arm’s length foreign exchange trans-
actions between unrelated parties, or the terms 
afforded by the bank or broker-dealer (or any 
affiliate of either) in comparable arm’s-length 
foreign exchange transactions involving unre-
lated parties, 
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ccoleman on PROD1PC71 with BILLS
527 
‘‘(C) the exchange rate used by such bank 
or broker-dealer (or affiliate) for a particular 
foreign exchange transaction does not deviate 
by more or less than 3 percent from the inter-
bank bid and asked rates for transactions of 
comparable size and maturity at the time of the 
transaction as displayed on an independent 
service that reports rates of exchange in the 
foreign currency market for such currency, and 
‘‘(D) the bank or broker-dealer (or any af-
filiate of either) does not have investment dis-
cretion, or provide investment advice, with re-
spect to the transaction.’’. 
(2) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—Subsection (d) of section 4975 of the In-
ternal Revenue Code of 1986 (relating to exemp-
tions), as amended by subsection (d), is amended by 
striking ‘‘or’’ at the end of paragraph (19), by strik-
ing the period at the end of paragraph (20) and in-
serting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(21) any foreign exchange transactions, be-
tween a bank or broker-dealer (or any affiliate of ei-
ther) and a plan (as defined in this section) with re-
spect to which such bank or broker-dealer (or affil-
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ccoleman on PROD1PC71 with BILLS
528 
iate) is a trustee, custodian, fiduciary, or other party 
in interest person, if— 
‘‘(A) the transaction is in connection with 
the purchase, holding, or sale of securities or 
other investment assets (other than a foreign 
exchange transaction unrelated to any other in-
vestment in securities or other investment as-
sets), 
‘‘(B) at the time the foreign exchange 
transaction is entered into, the terms of the 
transaction are not less favorable to the plan 
than the terms generally available in com-
parable arm’s length foreign exchange trans-
actions between unrelated parties, or the terms 
afforded by the bank or broker-dealer (or any 
affiliate of either) in comparable arm’s-length 
foreign exchange transactions involving unre-
lated parties, 
‘‘(C) the exchange rate used by such bank 
or broker-dealer (or affiliate) for a particular 
foreign exchange transaction does not deviate 
by more or less than 3 percent from the inter-
bank bid and asked rates for transactions of 
comparable size and maturity at the time of the 
transaction as displayed on an independent 
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ccoleman on PROD1PC71 with BILLS
529 
service that reports rates of exchange in the 
foreign currency market for such currency, and 
‘‘(D) the bank or broker-dealer (or any af-
filiate of either) does not have investment dis-
cretion, or provide investment advice, with re-
spect to the transaction.’’. 
(f) DEFINITION OF PLAN ASSET VEHICLE.—Section 
3 of such Act (29 U.S.C. 1002) is amended by adding 
at the end the following new paragraph: 
‘‘(42) the term ‘plan assets’ means plan assets as de-
fined by such regulations as the Secretary may prescribe, 
except that under such regulations the assets of any entity 
shall not be treated as plan assets if, immediately after 
the most recent acquisition of any equity interest in the 
entity, less than 25 percent of the total value of each class 
of equity interest in the entity is held by benefit plan in-
vestors. For purposes of determinations pursuant to this 
paragraph, the value of any equity interest held by a per-
son (other than such a benefit plan investor) who has dis-
cretionary authority or control with respect to the assets 
of the entity or any person who provides investment advice 
for a fee (direct or indirect) with respect to such assets, 
or any affiliate of such a person, shall be disregarded for 
purposes of calculating the 25 percent threshold. An entity 
shall be considered to hold plan assets only to the extent 
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ccoleman on PROD1PC71 with BILLS
530 
of the percentage of the equity interest held by benefit 
plan investors. For purposes of this paragraph, the term 
‘benefit plan investor’ means an employee benefit plan 
subject to part 4, any plan to which section 4975 of the 
Internal Revenue Code of 1986 applies, and any entity 
whose underlying assets include plan assets by reason of 
a plan’s investment in such entity.’’. 
(g) EXEMPTION FOR CROSS TRADING.— 
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sub-
section (e), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(19) CROSS
TRADING.—Any transaction de-
scribed in sections 406(a)(1)(A) and 406(b)(2) in-
volving the purchase and sale of a security between 
a plan and any other account managed by the same 
investment manager, if— 
‘‘(A) the transaction is a purchase or sale, 
for no consideration other than cash payment 
against prompt delivery of a security for which 
market quotations are readily available, 
‘‘(B) the transaction is effected at the 
independent current market price of the secu-
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ccoleman on PROD1PC71 with BILLS
531 
rity (within the meaning of section 270.17a– 
7(b) of title 17, Code of Federal Regulations), 
‘‘(C) no brokerage commission, fee (except 
for customary transfer fees, the fact of which is 
disclosed pursuant to subparagraph (D)), or 
other remuneration is paid in connection with 
the transaction, 
‘‘(D) a fiduciary (other than the invest-
ment manager engaging in the cross-trades or 
any affiliate) for each plan participating in the 
transaction authorizes in advance of any cross- 
trades (in a document that is separate from any 
other written agreement of the parties) the in-
vestment manager to engage in cross trades at 
the investment manager’s discretion, after such 
fiduciary has received disclosure regarding the 
conditions under which cross trades may take 
place (but only if such disclosure is separate 
from any other agreement or disclosure involv-
ing the asset management relationship), includ-
ing the written policies and procedures of the 
investment manager described in subparagraph 
(H), 
‘‘(E) each plan participating in the trans-
action has assets of at least $100,000,000, ex-
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ccoleman on PROD1PC71 with BILLS
532 
cept that if the assets of a plan are invested in 
a master trust containing the assets of plans 
maintained by employers in the same controlled 
group (as defined in section 407(d)(7)), the 
master 
trust 
has 
assets 
of 
at 
least 
$100,000,000, 
‘‘(F) the investment manager provides to 
the plan fiduciary who authorized cross trading 
under subparagraph (D) a quarterly report de-
tailing all cross trades executed by the invest-
ment manager in which the plan participated 
during such quarter, including the following in-
formation, as applicable: (i) the identity of each 
security bought or sold; (ii) the number of 
shares or units traded, (iii) the parties involved 
in the cross-trade; and (iv) trade price and the 
method used to establish the trade price, 
‘‘(G) the investment manager does not 
base its fee schedule on the plan‘s consent to 
cross trading, and no other service (other than 
the investment opportunities and cost savings 
available through a cross trade) is conditioned 
on the plan’s consent to cross trading, 
‘‘(H) the investment manager has adopted, 
and cross-trades are effected in accordance 
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ccoleman on PROD1PC71 with BILLS
533 
with, written cross-trading policies and proce-
dures that are fair and equitable to all accounts 
participating in the cross-trading program, and 
that include a description of the manager’s 
pricing policies and procedures, and the man-
ager’s policies and procedures for allocating 
cross trades in an objective manner among ac-
counts participating in the cross-trading pro-
gram, and 
‘‘(I) the investment manager has des-
ignated an individual responsible for periodi-
cally reviewing such purchases and sales to en-
sure compliance with the written policies and 
procedures described in subparagraph (H), and 
following such review, the individual shall issue 
an annual written report no later than 90 days 
following the period to which it relates signed 
under penalty of perjury to the plan fiduciary 
who authorized cross trading under subpara-
graph (D) describing the steps performed dur-
ing the course of the review, the level of compli-
ance, and any specific instances of non-compli-
ance. 
The written report under subparagraph (I) shall also 
notify the plan fiduciary of the plan’s right to termi-
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ccoleman on PROD1PC71 with BILLS
534 
nate participation in the investment manager’s 
cross-trading program at any time.’’. 
(2) AMENDMENTS
OF
INTERNAL
REVENUE 
CODE OF 1986.—Subsection (d) of section 4975 of 
the Internal Revenue Code of 1986 (relating to ex-
emptions), as amended by subsection (e), is amended 
by striking ‘‘or’’ at the end of paragraph (20), by 
striking the period at the end of paragraph (21) and 
inserting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(22) any transaction described in subsection 
(c)(1)(A) involving the purchase and sale of a secu-
rity between a plan and any other account managed 
by the same investment manager, if— 
‘‘(A) the transaction is a purchase or sale, 
for no consideration other than cash payment 
against prompt delivery of a security for which 
market quotations are readily available, 
‘‘(B) the transaction is effected at the 
independent current market price of the secu-
rity (within the meaning of section 270.17a– 
7(b) of title 17, Code of Federal Regulations), 
‘‘(C) no brokerage commission, fee (except 
for customary transfer fees, the fact of which is 
disclosed pursuant to subparagraph (D)), or 
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ccoleman on PROD1PC71 with BILLS
535 
other remuneration is paid in connection with 
the transaction, 
‘‘(D) a fiduciary (other than the invest-
ment manager engaging in the cross-trades or 
any affiliate) for each plan participating in the 
transaction authorizes in advance of any cross- 
trades (in a document that is separate from any 
other written agreement of the parties) the in-
vestment manager to engage in cross trades at 
the investment manager’s discretion, after such 
fiduciary has received disclosure regarding the 
conditions under which cross trades may take 
place (but only if such disclosure is separate 
from any other agreement or disclosure involv-
ing the asset management relationship), includ-
ing the written policies and procedures of the 
investment manager described in subparagraph 
(H), 
‘‘(E) each plan participating in the trans-
action has assets of at least $100,000,000, ex-
cept that if the assets of a plan are invested in 
a master trust containing the assets of plans 
maintained by employers in the same controlled 
group (as defined in section 407(d)(7) of the 
Employee Retirement Income Security Act of 
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ccoleman on PROD1PC71 with BILLS
536 
1974), the master trust has assets of at least 
$100,000,000, 
‘‘(F) the investment manager provides to 
the plan fiduciary who authorized cross trading 
under subparagraph (D) a quarterly report de-
tailing all cross trades executed by the invest-
ment manager in which the plan participated 
during such quarter, including the following in-
formation, as applicable: (i) the identity of each 
security bought or sold; (ii) the number of 
shares or units traded, (iii) the parties involved 
in the cross-trade; and (iv) trade price and the 
method used to establish the trade price, 
‘‘(G) the investment manager does not 
base its fee schedule on the plan‘s consent to 
cross trading, and no other service (other than 
the investment opportunities and cost savings 
available through a cross trade) is conditioned 
on the plan’s consent to cross trading, 
‘‘(H) the investment manager has adopted, 
and cross-trades are effected in accordance 
with, written cross-trading policies and proce-
dures that are fair and equitable to all accounts 
participating in the cross-trading program, and 
that include a description of the manager’s 
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ccoleman on PROD1PC71 with BILLS
537 
pricing policies and procedures, and the man-
ager’s policies and procedures for allocating 
cross trades in an objective manner among ac-
counts participating in the cross-trading pro-
gram, and 
‘‘(I) the investment manager has des-
ignated an individual responsible for periodi-
cally reviewing such purchases and sales to en-
sure compliance with the written policies and 
procedures described in subparagraph (H), and 
following such review, the individual shall issue 
an annual written report no later than 90 days 
following the period to which it relates signed 
under penalty of perjury to the plan fiduciary 
who authorized cross trading under subpara-
graph (D) describing the steps performed dur-
ing the course of the review, the level of compli-
ance, and any specific instances of non-compli-
ance. 
The written report shall also notify the plan fidu-
ciary of the plan’s right to terminate participation in 
the investment manager’s cross-trading program at 
any time.’’. 
(3) REGULATIONS.—No later than 180 days 
after the date of the enactment of this Act, the Sec-
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ccoleman on PROD1PC71 with BILLS
538 
retary of Labor, after consultation with the Securi-
ties and Exchange Commission, shall issue regula-
tions regarding the content of policies and proce-
dures required to be adopted by an investment man-
ager under section 408(b)(19) of the Employee Re-
tirement Income Security Act of 1974. 
(h) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to transactions occurring after the date 
of the enactment of this Act. 
(2) BONDING RULE.—The amendments made 
by subsection (b) shall apply to plan years beginning 
after such date. 
SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANS-
ACTIONS INVOLVING SECURITIES AND COM-
MODITIES. 
(a) AMENDMENT OF EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Section 408(b) of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1108(b)), as amended by sections 601 and 611, 
is further amended by adding at the end the following new 
paragraph: 
‘‘(20)(A) Except as provided in subparagraphs 
(B) and (C), a transaction described in section 
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