Service Provider
Compensation – Are
There New Limits?
April 9, 2008
Lisa J. Bleier
Center for Securities, Trusts & Investments
American Bankers Association
lbleier@aba.com
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• ERISA dictates the rules for the
conduct of fiduciaries
• Along with these rules are certain
prohibited transactions
• On top of the prohibited
transactions, are exemptions.
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Prohibited Transactions
ERISA Sec. 406(b)(3):
“A fiduciary with respect to a plan
shall not receive any consideration
for his own personal account from
any party dealing with such plan in
connection with a transaction
involving the assets of the plan.”
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What does 406(b)(3) mean?
• It is a prohibited transaction for
there to be a transaction between a
plan and a fiduciary, unless
specifically allowed – i.e. a PTE
• What is “consideration”, “personal
account”? “in connection with”?
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In a Nutshell
• Gifts and Entertainment is where
the DOL is focused
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–
–
–
–
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Golf outing
Nice dinner
Training seminar
Motorcycle?
Boat?
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What is New?
Is there a proposed change to the
law? No
What has changed?
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What is New?
• Comments of Virginia Smith, DOL
Office of Enforcement
• Activities of OLMS
– Revised LM-10
– Revised LM-30
– FAQs
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Comments from the DOL
Virginia Smith, Director of
Enforcement, EBSA, “Fiduciaries
must be very careful about
accepting any gift or gratuity from a
service provider, even items of
modest value.”
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What are LM-10/LM-30?
• The Forms that must completed
under the Labor Management
Reporting and Disclosure Act of
1959
• LM-30 – filed by the union officer or
employee
• LM-10 – filed by the employers and
service providers
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What are LM-10/LM-30?
• Must report any payment or loan,
direct or indirect, of money or other
things of value given to any union,
union official, agent or employee
• There are certain exceptions
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LM-10/LM-30 Exceptions in the FAQs
• De minimis of aggregate $250
• Exception for widely-attended
events
• Bank exception
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LM-10/LM-30
• Creates a paper trail
• Helps EBSA target enforcement
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Questions to ask before making a
payment or receiving a payment
• Is it permissible? Look to ERISA
rules
• If a union client, is it reportable?
Look to LMRDA
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But what does this have to do with
service providers who do not
service unions?
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This entire exercise in the union
context has focused DOL on gifts
and entertainment throughout the
industry – not just unions.
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Where do we go from here:
• Can a service provider pay
expenses for trustees which could
be properly paid by the plan?
• Is there any “bright line” to follow?
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Request for DOL Guidance
IAA and SIFMA have requested
guidance from the DOL based on
Rule NASD 3060.
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NASD Rule 3060
• Prohibits any person from giving
anything of value in excess of $100
per individual per year
• Does not apply to gifts of de
minimis value
• Does not apply to promotional items
of nominal value that display the
firm’s logo
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For Banks:
Bank Bribery Act
Internal Policies and Procedures
Ethical Rules
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Bank Bribery Amendments Act of 1985
• Requires that the financial
institution regulatory agencies
publish guidelines to assist
employees, officers, directors,
agents and attorneys of financial
institutions in complying with the
law
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Bank’s Code of Conduct
• Bank's code of conduct should prohibit any
employee, officer, director, agent or attorney from
(1) soliciting for themselves or for a third party
anything of value from anyone in return for any
business, service or confidential information of the
bank and (2) accepting anything of value (other
than bona fide salary, wages and fees referred to in
18 U.S.C. 215(c)) from anyone in connection with
the business of the bank, either before or after a
transaction is discussed or consummated
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Some of the Exceptions:
• Personal relationships
• Marketing expenses - to foster better business
relations
• Advertising or promotional material, such as pens,
pencils, note pads, key chains, calendars and
similar items
• Gifts of reasonable value that are related to
commonly recognized events or occasions, such
as a promotion, new job, wedding, retirement,
holiday or birthday; or
• Civic, charitable, educational, or religious
organization awards for recognition of service and
accomplishment
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Do we want or need any further
guidance?
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Thank you for your time!
Lisa J. Bleier
Center for Securities, Trusts &
Investments
American Bankers Association
lbleier@aba.com
1-800-BANKERS
www.aba.com
© 2005 AMERICAN BANKERS ASSOCIATION