I 
111TH CONGRESS 
1ST SESSION H. R. 1988 
To amend title I of the Employee Retirement Income Security Act of 1974 
to provide for independent investment advice for participants and bene-
ficiaries under individual account plans. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 21, 2009 
Mr. ANDREWS introduced the following bill; which was referred to the 
Committee on Education and Labor 
A BILL 
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 to provide for independent investment 
advice for participants and beneficiaries under individual 
account plans. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Conflicted Investment 
Advice Prohibition Act of 2009’’. 
SEC. 2. FINDINGS. 
The Congress finds as follows: 
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(1) The market downturn of 2008 had a dev-
astating effect on the retirement security income of 
millions of American workers. 
(2) According to the Congressional Budget Of-
fice, $2 trillion of Americans’ retirement savings was 
wiped out over a 15-month period starting in 2008. 
(3) According to Congressional Budget Office 
estimates, the value of pension funds and retirement 
accounts dropped by roughly $1 trillion last year. 
(4) Individual average losses of participants in 
401(k) plans ranged from 7.2 percent to 11.2 per-
cent in the first nine months of 2008, according to 
an Employee Benefit Research Institute analysis of 
2.2 million retirements account participants. 
(5) During the first nine months of 2008, 
stocks were down, with the S&P 500 index losing 
more than 19 percent. With over two-thirds of the 
assets in 401(k)-style defined contribution plans in-
vested in equities, either directly or through mutual 
funds, participants are exposed to increased risk and 
lack meaningful access to independent investment 
advise to help them better plan for their retirement. 
(6) Currently, 401(k) plan account holders have 
access to a self-interested or conflicted investment 
adviser. 
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(7) In 2007, the Government Accountability Of-
fice concluded that conflicts of interest can have an 
adverse affect on defined benefit and defined con-
tribution plans. 
SEC. 3. INDEPENDENT INVESTMENT ADVISERS FOR INDI-
VIDUAL ACCOUNT PLANS. 
(a) IN GENERAL.—Section 3 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new para-
graph: 
‘‘(43) INDEPENDENT INVESTMENT ADVISER.— 
‘‘(A) IN
GENERAL.—The term ‘inde-
pendent investment adviser’ means, with respect 
to an individual account plan that permits a 
participant or beneficiary to direct the invest-
ment of assets in their individual account, a 
person who is a fiduciary of the plan by reason 
of the provision of investment advice referred to 
in section 3(21)(A)(ii) by the person to the plan 
or a participant or beneficiary of the plan and 
who meets the requirements of either subpara-
graph (B) or (C). 
‘‘(B) REQUIREMENTS APPLICABLE TO IN-
VESTMENT
ADVISER.—An investment adviser 
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meets the requirements of this subparagraph, 
if— 
‘‘(i) such adviser 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 adviser 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 invest-
ment advice referred to in section 
3(21)(A)(ii) which is provided by such 
bank 
or 
institution 
is 
provided 
through a trust department of the 
bank or similar financial institution or 
savings association which is subject to 
periodic examination and review by 
Federal or State banking authorities, 
or 
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‘‘(III) any other person, but only 
if every individual providing the in-
vestment advice referred to in section 
3(21)(A)(ii) on behalf of such person 
(or on behalf of any affiliate thereof) 
is a registered representative, 
‘‘(ii) such adviser (and any affiliate 
thereof) does not provide or manage any 
investments in which plan assets of any in-
dividual account plan is invested, 
‘‘(iii) the fees or other compensation 
received, directly or indirectly, by such ad-
viser (and any affiliate thereof) with re-
spect to the provision of investment advice 
to any individual account plan or the par-
ticipants or beneficiaries of such a plan ei-
ther— 
‘‘(I) are not received from any 
person or persons (or anyone affili-
ated with such persons) that market, 
sell, manage or provide investments in 
which plan assets of any individual ac-
count plan are invested, or 
‘‘(II) do not vary depending on 
the basis of any investment option se-
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lected, and are calculated pursuant to 
one or more of the following bases— 
‘‘(aa) a flat-dollar basis, 
‘‘(bb) a flat percentage of 
total plan assets basis, or 
‘‘(cc) a per-participant basis, 
and 
‘‘(iv) such adviser provides the invest-
ment advice pursuant to a written arrange-
ment with the individual account plan 
that— 
‘‘(I) provides that the investment 
adviser is a fiduciary of the plan with 
respect to the provision of the advice, 
‘‘(II) requires that the advice be 
provided only by registered represent-
atives of the investment adviser or an 
affiliate thereof, 
‘‘(III) discloses whether the in-
vestment adviser or any affiliate 
thereof has any material financial, re-
ferral, or other relationship or ar-
rangement with a money manager, 
broker, other client of the investment 
adviser or any affiliate thereof, other 
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service provider to the plan, or any 
other entity that creates or may cre-
ate a conflict of interest for the in-
vestment adviser in performing serv-
ices pursuant to the arrangement with 
the plan and, if so, includes a descrip-
tion of such relationship or arrange-
ment, 
‘‘(IV) includes a representation 
by the investment adviser that, before 
the arrangement was entered into (or 
extended or renewed), the investment 
adviser provided to the plan fiduciary 
that has authority to cause the em-
ployee benefit plan to enter into (or 
extend or renew) the arrangement a 
written statement disclosing all fees or 
other compensation that the invest-
ment adviser or any affiliate thereof 
anticipates to receive with respect to 
the advice during the first year, or 
other period if less than a year, of the 
arrangement, and 
‘‘(V) provides that the investment 
adviser will provide to such plan fidu-
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ciary (and the participant and bene-
ficiary receiving the advice, if applica-
ble) a statement annually disclosing 
all fees or other compensation that 
the investment adviser or any affiliate 
thereof has received with respect to 
the advice during the prior year. 
‘‘(C) ADVICE PROVIDED TO PARTICIPANTS 
AND
BENEFICIARIES
UNDER
AN
INVESTMENT 
ADVICE PROGRAM MEETING REQUIREMENTS.— 
An investment adviser meets the requirements 
of this subparagraph if the investment advice 
provided by the adviser, to the extent that such 
advice is provided to participants and bene-
ficiaries of individual account plans, is provided 
under an investment advice program with re-
spect to which the requirements of clauses (i) 
through (x) are met. 
‘‘(i) ADVISER
REQUIREMENTS.—The 
requirements of this clause are met if the 
investment adviser providing the invest-
ment advice under the program is— 
‘‘(I) described in subclauses (I) 
or (II) of subparagraph (B)(i), 
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‘‘(II) 
an 
insurance 
company 
qualified to do business under the 
laws of a State, 
‘‘(III) a person registered as a 
broker or dealer under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a 
et seq.), 
‘‘(IV) an affiliate of a person de-
scribed in any of subclauses (I) 
through (III), or 
‘‘(V) an employee, agent, or reg-
istered representative of a person de-
scribed in subclauses (I) through (IV) 
who satisfies the requirements of ap-
plicable insurance, banking, and secu-
rities laws relating to the provision of 
the advice. 
‘‘(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 
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asset classes over defined periods of 
time, 
‘‘(II) utilizes relevant information 
about the participant, which may in-
clude age, life expectancy, retirement 
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 investment adviser or 
any person with a material affiliation 
or contractual relationship with the 
investment 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.— 
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‘‘(I) IN GENERAL.—The require-
ments of this clause are met with re-
spect to the program if an eligible in-
vestment expert certifies, prior to the 
utilization of the computer model and 
in accordance with rules prescribed by 
the Secretary, 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, there are material modifica-
tions to the computer model, the re-
quirements of this subparagraph 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.—For 
purposes 
of 
this 
clause, the term ‘eligible investment 
expert’ means any person— 
‘‘(aa) which meets such re-
quirements as the Secretary may 
provide, and 
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‘‘(bb) does not bear any ma-
terial affiliation or contractual 
relationship with any investment 
adviser or a related person there-
of (or any employee, agent, or 
registered representative of the 
investment adviser or related per-
son). 
‘‘(iv) EXCLUSIVITY OF RECOMMENDA-
TION.—The requirements of this clause are 
met with respect to the 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 pursuant to 
the investment advice occurs solely at 
the direction of the participant or 
beneficiary. 
‘‘(v) EXPRESS
AUTHORIZATION
BY 
SEPARATE FIDUCIARY.—The requirements 
of this clause are met with respect to the 
program if the program is expressly au-
thorized by a plan fiduciary other than— 
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‘‘(I) the person offering the pro-
gram, 
‘‘(II) any person providing in-
vestment options under the plan, and 
‘‘(III) any affiliate of either per-
son described in subclause (I) or (II). 
‘‘(vi) ANNUAL
AUDIT.—The require-
ments of this clause are met with respect 
to the program if an independent auditor, 
who has appropriate technical training or 
experience and proficiency and so rep-
resents in writing— 
‘‘(I) conducts an annual audit of 
the program for compliance with the 
requirements of this subparagraph, 
and 
‘‘(II) following completion of the 
annual audit, issues a written report 
to the fiduciary who authorized use of 
the program which presents its spe-
cific findings regarding compliance of 
the program with the requirements of 
this subsection. 
For purposes of this clause, an auditor is 
considered independent if it is not related 
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to the person offering the program to the 
plan and is not affiliated with any person 
providing investment options under the 
plan. 
‘‘(vii) 
DISCLOSURE.—The 
require-
ments of this clause are met with respect 
to the program, if— 
‘‘(I) the investment adviser pro-
vides to the participant or beneficiary 
receiving investment advice under the 
program with regard to any security 
or other property offered as an invest-
ment option, before providing the ad-
vice, a written notification (which may 
consist of notification by means of 
electronic communication)— 
‘‘(aa) of the role of any 
party that has a material affili-
ation or contractual relationship 
with the investment adviser in 
the development of the invest-
ment advice program and in the 
selection of investment options 
available under the plan, 
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‘‘(bb) of all fees or other 
compensation relating to the ad-
vice that the investment adviser 
or any affiliate thereof is to re-
ceive 
(including 
compensation 
provided by any third party) in 
connection with the provision of 
the advice or in connection with 
the sale, acquisition, or holding 
of the security or other property, 
‘‘(cc) of any material affili-
ation or contractual relationship 
of the investment adviser or af-
filiates thereof in the security or 
other property, 
‘‘(dd) of the manner, and 
under what circumstances, any 
information relating to the par-
ticipant or beneficiary which is 
provided under the program will 
be used or disclosed, 
‘‘(ee) of the types of services 
provided by the investment ad-
viser in connection with the pro-
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vision of investment advice by the 
investment adviser, and 
‘‘(ff) that a recipient of the 
advice may separately arrange 
for the provision of advice by an-
other adviser, that could have no 
material affiliation with, and 
could receive no fees or other 
compensation, in connection with 
the security or other property, 
and 
‘‘(II) at all times during the pro-
vision of advisory services to the par-
ticipant or beneficiary, the investment 
adviser— 
‘‘(aa) maintains the infor-
mation described in subclause (I) 
in accurate form and in the man-
ner described in clause (ix), 
‘‘(bb) 
provides, 
without 
charge, accurate information to 
the recipient of the advice no less 
frequently than annually, 
‘‘(cc) 
provides, 
without 
charge, accurate information to 
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the recipient of the advice upon 
request of the recipient, and 
‘‘(dd) 
provides, 
without 
charge, accurate information to 
the recipient of the advice con-
cerning any material change to 
the information required to be 
provided to the recipient of the 
advice at a time reasonably con-
temporaneous to the change in 
information. 
‘‘(viii) OTHER CONDITIONS.—The re-
quirements of this clause are met with re-
spect to the program, if— 
‘‘(I) the investment adviser pro-
vides appropriate disclosure, in con-
nection with the sale, acquisition, or 
holding of the security or other prop-
erty with respect to which the invest-
ment advice is provided under the 
program, in accordance with all appli-
cable securities laws, 
‘‘(II) the sale, acquisition, or 
holding occurs solely at the direction 
of the recipient of the advice, 
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‘‘(III) the compensation received 
by the investment adviser and affili-
ates thereof in connection with the 
sale, acquisition, or holding of the se-
curity or other property is reasonable, 
and 
‘‘(IV) the terms of the sale, ac-
quisition, or holding of the security or 
other property are at least as favor-
able to the plan as an arm’s length 
transaction would be. 
‘‘(ix) STANDARDS FOR PRESENTATION 
OF INFORMATION.— 
‘‘(I) IN GENERAL.—The require-
ments of this clause are met with re-
spect to the program if the notifica-
tion required to be provided to partici-
pants and beneficiaries under clause 
(vii)(I) is written in a clear and con-
spicuous manner and in a manner cal-
culated to be understood by the aver-
age plan participant and is sufficiently 
accurate and comprehensive to rea-
sonably apprise such participants and 
beneficiaries of the information re-
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quired to be provided in the notifica-
tion. 
‘‘(II) MODEL FORM FOR DISCLO-
SURE
OF
FEES
AND
OTHER
COM-
PENSATION.—The 
Secretary 
shall 
issue a model form for the disclosure 
of fees and other compensation re-
quired in clause (vii)(I)(bb) which 
meets the requirements of subclause 
(I). 
‘‘(x) MAINTENANCE FOR 6 YEARS OF 
EVIDENCE OF COMPLIANCE.—The require-
ments of this clause are met with respect 
to the program if the investment adviser 
who provides advice under the program 
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 provi-
sions of this subparagraph and of sub-
section (b)(14) have been met. A trans-
action 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 
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to circumstances beyond the control of the 
investment adviser. 
‘‘(D) DEFINITIONS.—For purposes of this 
paragraph— 
‘‘(i) AFFILIATE.—The term ‘affiliate’ 
of an investment adviser means any person 
directly or indirectly (through one or more 
intermediaries) controlling, controlled by, 
or under common control with the invest-
ment adviser, or any officer, director, 
agent, or employee of, or partner with, the 
investment adviser. 
‘‘(ii) 
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). 
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‘‘(iii) FEES
OR
OTHER
COMPENSA-
TION.—The term ‘fees or other compensa-
tion’ includes money or any other thing of 
monetary value (for example, gifts, awards, 
and trips) received, or to be received, di-
rectly from the plan or plan sponsor or in-
directly (i.e., from any source other than 
the plan or the plan sponsor) by the invest-
ment adviser or any affiliate thereof in 
connection with the advice to be provided 
pursuant to the arrangement or because of 
the investment adviser’s or any affiliate’s 
position with the plan. Fees or other com-
pensation may be expressed in terms of a 
monetary amount, percentage of the plan’s 
assets, or per capita charge for each par-
ticipant or beneficiary of the plan. The 
manner in which compensation or fees are 
expressed shall contain sufficient informa-
tion to enable the plan fiduciary to evalu-
ate the reasonableness of such compensa-
tion or fees.’’. 
(b) FIDUCIARY DUTIES WITH RESPECT TO INVEST-
MENT ADVICE.—Section 404(a) of such Act (29 U.S.C. 
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1104(a)) is amended by adding at the end the following 
new paragraph: 
‘‘(3)(A) The fiduciary of an individual account plan 
that permits a participant or beneficiary to direct the in-
vestment of assets in the individual account shall not ap-
point, contract with, or otherwise arrange for an invest-
ment adviser to provide investment advice referred to in 
section 3(21)(A)(ii) to the plan or the participant or bene-
ficiary unless the investment adviser is an independent in-
vestment adviser (as defined in section 3(43)(A)). 
‘‘(B) The independent investment adviser providing 
investment advice to a plan or to a participant or bene-
ficiary shall provide, before the initial provision of the ad-
vice, a written notification (which may consist of notifica-
tion by means of electronic communication)— 
‘‘(i) of the past performance and historical 
rates of return of the investment options available 
with respect to the plan and comparisons of such op-
tions to relevant benchmarks, and 
‘‘(ii) that the investment adviser is acting as a 
fiduciary of the plan in connection with the provision 
of the advice. 
‘‘(C) Nothing in this paragraph shall be construed to 
exempt a plan sponsor or other person who is a fiduciary 
from any requirement of this part for the prudent selec-
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tion and periodic review of an independent investment ad-
viser with whom the plan sponsor or other person enters 
into an 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 
independent investment adviser to any particular recipient 
of the advice. 
‘‘(D) 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).’’. 
(c) CONFORMING AMENDMENTS.—Section 408 of 
such Act (29 U.S.C. 1108) is amended— 
(1) by striking subsection (g); and 
(2) by striking subsection (b)(14)(B) and in-
serting the following: 
‘‘(B) the investment advice is provided by 
an independent investment adviser (as defined 
in section 3(43)).’’. 
(d) REGULATORY AUTHORITY.—The Secretary of 
Labor may issue regulations providing that an investment 
adviser can still be considered as meeting the requirements 
of section 3(43)(B) of the Employee Retirement Income 
Security Act of 1974 despite the receipt of a de minimus 
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amount of compensation that fails to meet the require-
ments of section 3(43)(B)(iii) of such Act due to the exist-
ence of previously existing contracts. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after one 
year after the date of the enactment of this Act. 
Æ 
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