Trust Updates Archive

ERISA--When to Question Investment Directives

(December 17, 2004, CHICAGO, IL)—In a move intended to lower the post-Enron risks for directed trustee, the U.S. Department of Labor today issued a guidance outlining the responsibilities of a directed trustee to question investment directives.

Field Assistance Bulletin 2004-03 puts into writing the DOL’s position that the named fiduciary, not the directed trustee, is primarily responsible for ensuring the prudence of plan investment decisions.

Only in limited circumstances, says the DOL, is a “directed trustee required to question the directing fiduciary’s instructions regarding transactions involving publicly traded securities.”

The FAB specifically addresses the responsibilities of a directed trustee in determining whether a direction is “proper” -- consistent with the terms of the plan and not contrary to ERISA. For instance, when a directed trustee has nonpublic information regarding a security, the directed trustee has a duty to inquire whether the named fiduciary’s knowledge and review of the security is sufficient to make a prudent decision. When a directed trustee is aware of “clear and compelling public indicators,” questioning the viability of the issuer of a security, it has a responsibility, in turn, to question directions involving the purchase or holding of that security.

For more information see the January issue of TRN. The FAB is available on the DOL’s website and by going to

-- Copyright ©2004 A.M. Publishing, Inc., Trust Regulatory News

No statement in this issue is offered as or should
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