Fiduciary Rule Proposal – Prohibited Transaction Class Exemption (“PTCE”) 75-1, Part V


SIFMA is pleased to provide comments regarding the Department of Labor’s (“Department”) proposed amendment to PTE 75-1, Part V, which extends relief to extensions of credit in connection with securities transactions under section 408 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and section 4975(b) of the Internal Revenue Code of 1986, as amended (the “Code”). We appreciate the opportunity to comment and hope that our comments are helpful to the Department as it assesses the impact of the proposal on plans and their participants as well as IRAs. SIFMA shares the Department’s concern that normal securities transactions for plans and IRAs be effected in as efficient and economic a manner as possible and that the exemptions themselves, and how they are to be interpreted, do not result in costly litigation.

The Department properly recognizes that relief on the nature and extent to which ordinary and customary transactions between broker-dealers and employee benefit plans are subject to the prohibited transaction rules is important to the orderly settlement of transactions. However, we do not understand why the Department has limited the relief to settlement failures when it noted, forty years ago, that this relief is also necessary in connection with short sales, options contracts, and other transactions. These transactions will continue to take place for IRAs and plans and the relief provided under this exemption is critical to a short sale, an options trade or a margin transaction. We assume that the Department is not intending to outlaw these transactions for all plans and IRAs, and assuming we are correct in that assumption, we respectfully request that the Department reinstate the additional relief under current law.

In addition, we believe that the language that the Department has chosen in section (c)(1) of its proposal will generate confusion and litigation and will impede efficient settlement of transactions.

It is appropriate that the Department’s disclosure requirement is based on SEC required disclosure and that it has determined that compliance with the SEC standard will constitute compliance with the disclosure requirements of this exemption. As noted in other comments, we think holding financial institutions to the same standard will decrease the costs of compliance, will minimize errors, and will ultimately be in the best interest of IRAs, plans and their participants.

See Also:

United States Department of Labor: Conflict of Interest Proposed Rule

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