Opinion ID: 578328
Heading Depth: 3
Heading Rank: 2

Heading: Subsection Two

Text: 10 Department of Labor regulations define the term investment advice as used in subsection two of the definition thusly: 11 A person shall be deemed to be rendering investment advice to an employee benefit plan, ... only if:(i) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and 12 (ii) Such person either directly or indirectly ...-- 13 (A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or 14 (B) Renders any advice ... on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan.... 15 29 C.F.R. 2510.3-21(c). 16 At issue in this case is the meaning of parts (ii)(A) and (ii)(B). Part (ii)(A) describes a person who has discretion with respect to an ERISA plan, even if such discretion did not arise from an agreement, arrangement or understanding. Thus, part (ii)(A) essentially describes all people described by part one of § 1002(21)(A) (people exercising discretionary authority) and part three of § 1002(21)(A) (people who have been granted discretionary authority). 4 17 Part (ii)(B) is to be applied by first determining whether under the regulation there existed a mutual agreement or understanding between the parties that [the broker's] advice would be the primary basis for the Plan's investment decisions. Farm King Supply, Inc. v. Edward D. Jones & Co., 884 F.2d 288, 293 (7th Cir.1989). We agree with the Seventh Circuit that this issue is comparable to the corresponding 'meeting of the minds' component of contract cases. Whether a meeting of minds exists is an issue for the trier of fact. Id. at 293 n. 6. 5 18 These regulations were adopted to insure brokers are not given fiduciary status without their knowledge. See id. at 292-93 (citing 40 Fed.Reg. at 50843); Pension Fund--Local 701 v. Omni Funding Group, 731 F.Supp. 161, 165 (D.N.J.1990). Our interpretation of these regulations is consistent with this goal. A person who usurps authority over a plan's assets and makes decisions about the use or disposition of those assets should know they are acting as a fiduciary. Similarly, a broker necessarily has reason to know that his advice is being used as a primary basis for investment decisions with respect to plan assets if the facts demonstrate a meeting of the minds as contemplated by part (ii)(B) exists, thus it is proper to impose fiduciary status upon such a broker.