Opinion ID: 5795
Heading Depth: 2
Heading Rank: 2

Heading: Subsection (ii)—Investment Advice

Text: The Department of Labor has adopted regulations explaining when a person is deemed to be providing investment advice under subsection (ii) of 29 U.S.C. § 1002(21)(A): A person shall be deemed to be rendering investment advice to an employee benefit plan, within the meaning of [29 U.S.C. § 1002(21)(A)(ii) ], 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 (ii) Such person either directly or indirectly ... (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 (B) Renders any advice described in paragraph (c)(1)(i) of this section 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 regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments. 29 C.F.R. § 2510.3-21(c)(1) (emphasis added) (DOL Regulation); see also American Federation of Unions, 841 F.2d at 664 & n. 5 (applying the DOL Regulation); Farm King Supply, Inc. Integrated Prof it Sharing Plan & Trust v. Edward D. Jones & Co., 884 F.2d 288, 291-94 (7th Cir.1989) (same). The district court below did not discuss the DOL Regulation in ruling on Boswell's fiduciary status. See 800 F.Supp. at 473-74. Boswell does not dispute that the first requirement of the DOL Regulation is met; he made recommendations as t o the advisability of purchasing life insurance. See 29 C.F.R. § 2510.3- 21(c)(1)(i). The parties dispute whether the second requirement of the DOL Regulation is met. There are two ways to satisfy this second requirement. First, the second requirement is met if the person (Boswell) had discretionary authority or control with respect to purchasing property for the plan. See id. § 2510.3(c)(1)(ii)(A) (Subpart (ii)(A)). Subpart (ii)(A) of the DOL Regulation appears to overlap with subsection (i) of 29 U.S.C. § 1002(21)(A), which we discussed above. If a person has discretionary authority or control with respect to purchasing or selling securities or other property for the plan, that person would satisfy subsection (i) of 29 U.S.C. § 1002(21)(A) as well as satisfy Subpart (ii)(A) of the DOL Regulation. See Olson v. E.F. Hutton & Co., 957 F.2d 622, 626 n. 4 (8th Cir.1992) (recognizing that Subpart (ii)(A) of the DOL Regulation overlaps with subsection (i) of the statutory definition).2 For the reasons discussed above, we hold that Boswell did not have discretionary authority or control with respect to the Profit Sharing Plan's purchase of the insurance policies on Schloegel's life. The second way of satisfying the second requirement of the DOL Regulation is by rendering investment-type advice on a regular basis to the plan pursuant to a mutual agreement, arrangement, or understanding between the advisor and the plan. That mutual agreement, arrangement, or understanding must indicate that such advice will serve as the primary basis for the plan's investment decisions and that the advisor will render individualized investment advice based on the plan's particular investment needs. See 29 C.F.R. 2510.3-21(c)(1)(ii)(B) (Subpart (ii)(B)). Boswell's relationship with the Profit Sharing Plan fails to satisfy Subpart (ii)(B). Despite 2 We note that Subpart (ii)(A) of the DOL Regulation is narrower in scope than subsection (i) of 29 U.S.C. § 1002(21)(A). Subpart (ii)(A) of the DOL Regulation covers only discretionary authority or control with respect to purchasing or selling the plan's property. Eastland's, Peterman's, and Schloegel's testimony that Boswell advised the Profit Sharing Plan, the record fails to show that Boswell rendered investment-type advice to the Profit Sharing Plan on a regular basis. Aside from the advice given in 1977 and 1980 regarding the life insurance for Schloegel and other executives, Eastland could only think of one other time when Boswell gave him investment advice. In searching through the record, we found only a few instances of Boswell providing investment-type advice to the Profit Sharing Plan. Furthermore, nothing in the record shows that the Profit Sharing Plan and Boswell had a mutual arrangement or understanding that Boswell's advice would serve as the primary basis for the plan's investment decisions. We noted earlier that only two members of the Bank's management committee followed Boswell's sale's pitch. The fact that Eastland solicited Dowd's advice on the advisability of purchasing life insurance further indicates that Eastland did not exclusively rely on Boswell's advice. Eastland testified at trial that he did not seek [Boswell] out and ask advice but that, if Boswell approached him, he was willing to listen. This falls far short of the type of relationship described in the DOL Regulation. Based on the DOL Regulation and the evidence at trial, we conclude, as a matter of law, that Boswell did not render investment advice for purposes of subsection (ii) of 29 U.S.C. § 1002(21)(A).