ERISA Amended to Clarify Treatment of Non-SEC Registered Advisers

Washington, DC, October 30, 1997 - Congress has amended ERISA to make permanent a temporary amendment that was added to ERISA last year to permit non-SEC registered investment advisers to act as fiduciaries under ERISA. This legislation, S. 1227, which is effective retroactively to July 8, 1997, supersedes the temporary amendment.

When the National Securities Markets Improvement Act of 1996 ("NSMIA") was under consideration by Congress last year, there was concern expressed that those advisers that, upon enactment of NSMIA would no longer be eligible for continued registration with the Securities and Exchange Commission ("SEC"), would similarly become ineligible to act as "investment managers" under ERISA. Pursuant to ERISA Section 3(38)(B), an investment manager must be registered with the SEC as an investment adviser. To address this concern, Section 308 of NSMIA amended ERISA to permit an investment adviser to act as an investment manager to employee benefit plans provided it was registered as an investment adviser either with the SEC "or under the laws of any State." This amendment, however, was temporary and was scheduled to expire two years after its enactment-i.e., as of October 12, 1998. By enacting S. 1227, however, Congress has made permanent this temporary amendment.