SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Retirement Security
Advice Act of 2001’’.
SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE
PROVISION OF INVESTMENT ADVICE.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) IN GENERAL.—Section 408(b) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end
the following new paragraph:
‘‘(14) If the requirements of subsection (g) are
met—
‘‘(A) the provision of investment advice re-
ferred to in section 3(21)(A)(ii) provided by a
fiduciary adviser (as defined in subsection
(g)(4)(A)) to an employee benefit plan or to a
participant or beneficiary of an employee ben-
efit plan,
‘‘(B) the sale, acquisition, or holding of se-
curities or other property (including any lending
of money or other extension of credit associated
with the sale, acquisition, or holding of securi-
ties or other property) pursuant to such invest-
ment advice, and
‘‘(C) the direct or indirect receipt of fees
or other compensation by the fiduciary adviser
or an affiliate thereof (or any employee, agent,
or registered representative of the fiduciary ad-
viser or affiliate) in connection with the provi-
sion of such investment advice.’’.
(2) REQUIREMENTS.—Section 408 of such Act
is amended further by adding at the end the fol-
lowing new subsection:
‘‘(g)(1) The requirements of this subsection are met
in connection with the provision of advice referred to in
section 3(21)(A)(ii), provided to an employee benefit plan
or a participant or beneficiary of an employee benefit plan
by a fiduciary adviser with respect to such plan, in connec-
tion with any sale or acquisition of a security or other
property for purposes of investment of amounts held by
such plan, if—
‘‘(A) in the case of the initial provision of such
advice with regard to a security or other property,
by such fiduciary adviser to such plan, participant,
or beneficiary, the fiduciary adviser provides to the
recipient of such advice, at the time of or before the
initial provision of such advice, a clear and con-
spicuous description, in writing (including by means
of electronic communication), of—
‘‘(i) all fees or other compensation relating
to such advice that the fiduciary adviser or any
affiliate thereof is to receive (including com-
pensation provided by any third party) in con-
nection with the provision of such advice or in
connection with such acquisition or sale,
‘‘(ii) any material affiliation or contractual
relationship of the fiduciary adviser or affiliates
thereof in such security or other property,
‘‘(iii) any limitation placed on the scope of
the investment advice to be provided by the fi-
duciary adviser with respect to any such sale or
acquisition, and
‘‘(iv) the types of services offered by the fi-
duciary advisor in connection with the provision
of investment advice by the fiduciary adviser,
‘‘(B) in the case of the initial or any subsequent
provision of such advice to such plan, participant, or
beneficiary, the fiduciary adviser, throughout the 1-
year period following the provision of such advice,
maintains the information described in clauses (i)
through (iv) of subparagraph (A) in currently accu-
rate form for availability, upon request and without
charge, to the recipient of such advice,
‘‘(C) the fiduciary adviser provides appropriate
disclosure, in connection with any such acquisition
or sale, in accordance with all applicable securities
laws,
‘‘(D) such acquisition or sale occurs solely at
the direction of the recipient of such advice,
‘‘(E) the compensation received by the fiduciary
adviser and affiliates thereof in connection with such
acquisition or sale is reasonable, and
‘‘(F) the terms of such acquisition or sale are
at least as favorable to such plan as an arm’s length
transaction would be.
‘‘(2) A fiduciary adviser referred to in paragraph (1)
who has provided advice referred to in such paragraph
shall, for a period of not less than 6 years after the provi-
sion of such advice, maintain any records necessary for
determining whether the requirements of the preceding
provisions of this subsection and of subsection (b)(14)
have been met. A transaction prohibited under section 406
shall not be considered to have occurred solely because the
records are lost or destroyed prior to the end of the 6-
year period due to circumstances beyond the control of the
fiduciary adviser.
‘‘(3)(A) Subject to subparagraph (B), a plan sponsor
or other person who is a fiduciary shall not be treated
as failing to meet the requirements 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 contracting
for or otherwise arranging for the provision of such invest-
ment advice), if—
‘‘(i) such advice is provided by a fiduciary ad-
viser pursuant to an arrangement between such plan
sponsor or other fiduciary and such fiduciary adviser
for the provision by such fiduciary adviser of invest-
ment advice referred to in such section, and
‘‘(ii) the terms of such arrangement require
compliance by the fiduciary adviser with the require-
ments of this subsection.
‘‘(B) Nothing in subparagraph (A) shall be construed
to exempt a plan sponsor or other person who is a fidu-
ciary 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 ar-
rangement for the provision of advice referred to in section
3(21)(A)(ii). Such plan sponsor or other person who is a
fiduciary has no duty under this part to monitor the spe-
cific investment advice given by the fiduciary adviser to
any particular recipient of such advice.
‘‘(C) Nothing in this part shall be construed to pre-
clude the use of plan assets to pay for reasonable expenses
in providing investment advice referred to in section
3(21)(A)(ii).
‘‘(4) For purposes of this subsection and subsection
(b)(14)—
‘‘(A) 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 investment advice
by such person to the plan or to a participant or
beneficiary 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),
‘‘(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 rep-
resentative of a person described in any of
clauses (i) through (v).
‘‘(B) The term ‘affiliate’ means an affiliated
person, as defined in section 2(a)(3) of the Invest-
ment Company Act of 1940 (15 U.S.C. 80a–
2(a)(3)).
‘‘(C) The term ‘registered representative’ means
a person described in section 3(a)(18) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c(a)(18))
or section 202(a)(17) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b–2(a)(17)).’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) IN
GENERAL.—Subsection (d) of section
4975 of the Internal Revenue Code of 1986 (relating
to exemptions from tax on prohibited transactions)
is amended—
(A) in paragraph (14), by striking ‘‘or’’ at
the end;
(B) in paragraph (15), by striking the pe-
riod at the end and inserting ‘‘; or’’; and
(C) by adding at the end the following new
paragraph:
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met in connection with the
provision of advice referred to in subsection
(e)(3)(B), provided to a plan or a participant or
beneficiary of a plan by a fiduciary adviser with
respect to such plan, in connection with any
sale or acquisition of a security or other prop-
erty for purposes of investment of amounts held
by such plan, if—
‘‘(i) in the case of the initial provision
of such advice by such fiduciary adviser to
such plan, participant, or beneficiary, the
fiduciary adviser provides to the plan, par-
ticipant, or beneficiary, at the time of or
before the initial provision of such advice,
a description, in writing or by means of
electronic communication, of—
‘‘(I) all fees or other compensa-
tion relating to such 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 such advice or in connection
with such acquisition or sale,
‘‘(II) any material affiliation or
contractual relationship of the fidu-
ciary adviser or affiliates thereof in
such security or other property,
‘‘(III) any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale or acqui-
sition, and
‘‘(IV) the types of services of-
fered by the fiduciary advisor in con-
nection with the provision of invest-
ment advice by the fiduciary adviser,
‘‘(ii) in the case of the initial or any
subsequent provision of such advice to such
plan, participant, or beneficiary, the fidu-
ciary adviser, throughout the 1-year period
following the provision of such advice,
maintains the information described in
subclauses (I) through (IV) of clause (i) in
currently accurate form for availability,
upon request and without charge, to the
recipient of such advice,
‘‘(iii) the fiduciary adviser provides
appropriate disclosure, in connection with
any such acquisition or sale, in accordance
with all applicable securities laws,
‘‘(iv) such acquisition or sale occurs
solely at the discretion of the recipient of
such advice,
‘‘(v) the compensation received by the
fiduciary adviser and affiliates thereof in
connection with such acquisition or sale is
reasonable, and
‘‘(vi) the terms of such acquisition or
sale are at least as favorable to such plan
as an arm’s length transaction would be.
‘‘(B) MAINTENANCE OF RECORDS.—A fi-
duciary adviser referred to in subparagraph (A)
who has provided advice referred to in such
subparagraph shall, for a period of not less
than 6 years after the provision of such advice,
maintain any records necessary for determining
whether the requirements of the preceding pro-
visions of this subsection and of subsection
(d)(16) have been met. A prohibited transaction
described in subsection (c)(1) shall not be con-
sidered to have occurred solely because the
records are lost or destroyed prior to the end of
the 6-year period due to circumstances beyond
the control of the fiduciary adviser.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph and subsection (d)(16)—
‘‘(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-
ment advice by such person to the plan or
to a participant or beneficiary 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 subsection
(d)(4),
‘‘(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 de-
scribed in any of subclauses (I)
through (IV), or
‘‘(VI) an employee, agent, or reg-
istered representative of a person de-
scribed in any of subclauses (I)
through (V).
‘‘(ii) AFFILIATE.—The term ‘affiliate’
means an affiliated person, 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’ means a person described in section
3(a)(18) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(18)) or section
202(a)(17) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b–2(a)(17)).’’.
SEC. 3. EFFECTIVE DATE.
The amendments made by this Act shall apply with
respect to advice referred to in section 3(21)(A)(ii) of the
Employee Retirement Income Security Act of 1974 or sec-
tion 4975(e)(3)(B) of the Internal Revenue Code of 1986
provided on or after January 1, 2002.
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