Department of Labor Requests Information Regarding Cross Trades

Washington, DC, March 24, 1998 - On March 20, the Department of Labor published a request for information on the cross-trading of securities by investment managers where the trades involve pension plan assets. Such trades are subject to the fiduciary responsibility and prohibited transaction rules of the Employee Retirement Income Security Act of 1974 (ERISA).

Historically, the Department has granted only limited individual exemptive relief from the ERISA prohibitions for cross-trades of securities by investment managers on behalf of employee benefit plan accounts or pooled funds that contain plan assets. This relief has included significant conditions with which investment managers engaged in the cross-trades must comply. Presently, the Department is seeking information to assist it in determining upon what standards and safeguards future exemptive relief should be conditioned.

The release provides background information regarding cross-trades, including the types of cross-trading transactions for which individual exemptions previously have been granted, reasons why certain cross-trades may benefit pension plans, and potential abuses that the Department believes may arise from cross-trades involving pension plan assets. In the release, the Department also expresses concern that the safeguards for similar activity set forth under SEC Rule 17a-7 may not satisfactorily address concerns that may arise under ERISA.

The Department asks that interested persons submit information regarding cross-trades and has enumerated 25 specific questions designed to elicit information that the Department believes would be especially helpful in developing future exemptive relief. Comments must be received on or before May 19, 1998 by the Pension and Welfare Benefits Administration, Office of Exemption Determinations, Room N-5649, 200 Constitution Avenue, NW, Washington, DC 20210, Attn.: "Cross-Trades of Securities."