1. EVERY BROKER DEALER SHOULD KNOW
BACK TO THE FUTURE
ERISA PTEs
EVERY BROKER DEALER SHOULD KNOW
Stephen P. Wilkes, Esq.
300 Montgomery Street, Suite 600, San Francisco, CA 94104

2. Agenda Introduction: Who is covered? Types of PTs?
Exemptions: Different Types – Admin or Statutory
Trading: Agency or Principal
Securities Lending
Underwriting
Margin Lending
Soft Dollar
Correction
Advice – Land of the Unknown?

3. Agenda
Affiliated Product
Mutual Fund
Insurance

4. Introduction ERISA Creates Duty and Prohibits Certain Transactions
Who is covered? Employee Pension and Welfare Plans as well as commingled vehicles, certain bank and insurance funds. Who is excluded? ERISA Plan v Qualified Retirement Plan?
Discretionary Plans are outside scope of Fiduciary Rule
Execution of securities transactions

5. PTs and Exemptions - Types
Per Se PTs Under 406(a)
Fiduciary / Conflict PTs under 406(b)
IRC parallel provisions
Statutory exemptions
Class exemptions
Individually granted exemptions

6. Expansive Class Exemptions
QPAM – very broad based; PTE (See also INHAM PTE 96-23)
BD obtains certain reps and warranties
What makes a fiduciary “independent”?
Source of Funds Exemptions (PTE 95-60, 90-1, )

7. ERISA Statutory Exemptions
PPA
Section 408(b)(17) – Service Provider
Section 408(b)(14) – Participant Investment Advice
Section 408(b)(15) – Block Trades
Section 408(b)(18) – FX
Section408(b)(19) – Cross Trading
Section 408(b)(2) – Corrections
Section 408(b)(2); Section 408(b)(4), (6) and (8)
Section 408(g) – participant advice

8. Agency Trades PTE 86-128 Cross Trades
Agency Trades : Affiliated or unaffiliated adviser/fiduciary?
Fate of ICS unknown at the moment
IRA accounts
Cross Trades
PTE

9. Principal Trades PTE 75-1 – BD is non – fiduciary
BD is registered
Ordinary course of business
Arms length
BD as fiduciary – limited under PTE 75-1

10. Securities Lending PTE 2006-16 Borrower qualifications
No discretion or advisory role for borrower/affiliates
Collateral
Documentation: financial statements, written loan agreement
Reasonable fee
Termination rights

11. Soft Dollars
Section 28(e)
ERISA Technical Release 86-1

12. Underwriting Transactions
PTE 75-1
BD as Fiduciary
BD as Non-Fiduciary

13. Margin Lending PTE 75-1 BD is registered Non-fiduciary role
Credit for securities transaction and is otherwise lawful

14. Repurchase and Reverse Repurchase
PTE for Repurchase
PTE /QPAM /Source of Funds for Reverse Repurchase
Conditions for PTE 81-8
Seller requirements
No discretionary or advisory role
Collateral

15. Rebates Rebate to plan involved Best Execution
For authorized Plan expenses

16. Corrections Section 408(b)(20) For securities and commodities
14 day cure period

17. Insurance
Section 408(b)(8)
PTE 84-24
PTE 77-4

18. Mutual Funds
PTE 84-24
PTE 77-4

19. Important Information
This presentation is intended for general informational purposes only, and it does not constitute legal, tax or investment advice from The Wagner Law Group.

20. EVERY BROKER DEALER SHOULD KNOW
BACK TO THE FUTURE
ERISA PTEs
EVERY BROKER DEALER SHOULD KNOW
Stephen P. Wilkes, Esq.
300 Montgomery Street, Suite 600, San Francisco, CA 94104