CABINET COUNCIL ON ECONOMIC AFFAIRS MINUTES MARCH 1, 1985 MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00539R002303820016-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 33
• Document Creation Date: December 22, 2016
• Document Release Date: April 8, 2010
• Sequence Number: 16
• Publication Date: April 2, 1985
• Content Type: MEMO

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? Date: 4/2/85
Subject: Cabinet Council on Economic Affairs Minutes
March.l, 1985 Meeting
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
OMB.,
CIA ~
UN""
USTR
Chief of Staff
GSA
EPA
NASA
OPM
VA
SBA
CEA
CEQ
OSTP
Deaver
Mc Farlane
Svahn
Chew (For WH Staffing)
Executive Secretary for:
CCCT
CCEA
CCFA
CCHR
CCLP
CCMA
CCNRE
Attached for your information are the minutes of the
March 1 meeting of the Cabinet Council on Economic
Affairs.
^ Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Don Clarey
] Tom Gibson
^ Larry Herbolsheimer
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MINUTES
CABINET COUNCIL ON ECONOMIC AFFAIRS
March 1, 1985
8:45 a.m.
Roosevelt Room
Attendees: Messrs. Baker, Baldrige, Pierce, Darman, Ford,
Burnley, Boggs, Niskanen, Porter, Wright, Breeden,
Gibson, Ginsburg, Healey, and Li, and Ms. Risque.
1. Report of the Working Group on corporate Takeovers
Doug Ginsburg presented a report of the Working Group on
Corporate Takeovers, which proposed an Administration
position on possible Federal legislation restricting
corporate takeover activity. The proposed position includes
the following elements.
First, corporate takeovers perform several beneficial
functions and are generally good for the economy. The same
reasons justifying mergers also apply to hostile takeovers,
which include gaining operating efficiencies and shifting
corporate assets to higher valued uses. Moreover, takeovers
pressure target managements to maximize shareholder wealth.
The empirical evidence indicates that shareholders in both
the target and bidding companies benefit from successful
takeovers.
Second, the Working Group analyzed the extent of the problem
of abuses in tender offers. Although various limitations on
bidder activities have been proposed, the need for
additional restrictions on such activities has not been
demonstrated. These proposed limitations include
prohibiting two-tier tender offers and extending the 20-day
tender offer period.
Target company shareholders need and have protection from
abuses by target managements in conjunction with contests
for corporate control. They need protection because of the
agency problem. Managers may not act in the best interests
of shareholders because of divergent interests. In
particular, the target management may oppose a tender offer
in order to protect its employment even if the tender offer
is in the best interests of the shareholders.
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Minutes
Cabinet Council on Economic Affairs
March 1, 1985
Page two
Third, several means exist for checking management abuses
and providing shareholder protection:
o Shareholders can oppose management through the proxy
process. Although management controls the proxy
process, the influence of institutional shareholders
maybe making this approach more effective.
o Contracts between shareholders and managers can align
their interests more closely, for example, through
stock options.
o State courts can protect the interests of target
shareholders. There are many pending decisions
involving target management abuses, which will reveal
the value of this safeguard.
o States can amend their corporation laws to deal with
abusive defensive tactics.
Fourth, only if there is a serious market failure of
national dimensions should the Federal Government then
consider taking appropriate steps to curb the potential for
abuse.
The Council discussed the ability of the States to check
certain abuses, such as greenmail. The Council also
reviewed the likelihood of corporate takeover legislation
passing this year. The Chairman of the Securities and
Exchange Commission recently indicated privately that he
will not support legislation restricting takeover activity.
Finally, Council members noted the potential for such
legislation opening the way for Federal corporation law.
The Chairman Pro Tempore requested the Executive Secretary
to prepare a memorandum from the Cabinet Council to the
President, recommending the proposed Administration position
on corporate takeovers.
 ACTION
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D/ICS
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DDI
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DDA
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DDO
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/ Executive Secretary
1 March 1985
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vvs anIno1vrv
Subject: Cabinet Council on Economic Affairs Planning Meet-7r
Corporate Takeovers
March 1, 1985 - 8:45 A.M. - Roosevelt Room - TOPICS: Pension Policy
CABINET AFFAIRS STAFFING MEMORANDUM
Date: 2/28/85 Number: 169144CA Due By:
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Counsellor
Action FYI
^ ^
0
0
^ ..
Svahn
GSA
EPA
CCFA
NASA
OPM
VA
SBA
^ ^
^ ^
There will be a meeting of the Cabinet Council on Economic
Affairs on Friday, March 1, at 8:45 A.P'.. in the Roosevelt
Room.
The agenda and background paper for the second agenda item
are attached.
RETURN TO:
^ Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Don Clarey
^ Tom Gibson
^ Larry Herbolsheimer
Associate Director
i! Office of Cabinet Affairs
11 ArC-lQnn 10---
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MEMORANDUM FOR THE CABINET COUNCIL ON ECONOMIC AFFAIRS
FROM: ROGER B. PORTER 4'P
SUBJECT: Agenda and Paper for the March 1 Meeting
The agenda and paper for the March 1 meeting of the Cabinet
Council on Economic Affairs are attached. The meeting is
scheduled for 8:45 a.m. in the Roosevelt Room.
The Council is scheduled to consider two agenda items:
corporate takeovers and pension policy. The Council last
considered corporate takeovers at its meeting on July 24,
1984, when it established an interagency working group to
determine the extent of the problem of abuses in tender
offers and what approach would best'addresspotential abuses.
The Working Group has held a number of meetings examining the
data and developing an Administration position on possible
corporate takeover legislation. A package of materials
from Doug Ginsburg, chairman of the Working Group on Corporate
Takeovers, was distributed to Council members on January 22.
A "Proposed Administration Position on Corporate Takeovers"
incorporating the latest revisions was distributed to Coun-
cil members on February 15.
The second agenda item is the report of the Working
Group on Pension Policy chaired by William Niskanen. A
memorandum from the working Group reviewing the status of
several current pension policy issues and requesting the
Council's guidance is attached.
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THE WHITE HOUSE
WASHINGTON
March 1, 1985
8:45 a.m.
Roosevelt Room
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EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
CM #112
SUBJECT: Pension Policy Issues
The purpose of this memorandum is to bring the CCEA up to
date on the current status of recent pension policy
developments and to seek the guidance of the Council on several
issues.
1. Minimum Funding Waivers
The Internal Revenue Service has the authority to grant
waivers of normal pension plan funding requirements in cases of
"substantial business hardship." A plan sponsor can receive
minimum funding waivers for up to five years out of any
consecutive 15 year period. Minimum funding waivers are, in
essence, loans from pension plans to plan sponsors. If these
loans are not repaid, the resulting loss falls primarily on the
PBGC insurance system and secondarily on plan participants.
The PBGC estimates that 20 percent of the deficit in the single
employer fund can be attributed to waivers of minimum funding
standards.
Minimum funding waivers raise important and complex
issues. In some cases, the long term viability of a firm may
depend on a minimum funding waiver. Chrysler, for instance,
was granted minimum funding waivers as part of a rescue package
that included a federal loan guarantee.
The appropriateness and effectiveness of federal actions
in the Chrysler case is still a matter of debate. The role
played by funding waivers in the rescue package is also
unclear. The waivers may have played an important role by
providing credit and by increasing the Federal stake in the
ultimate survival of Chrysler. It is also possible that the
funds would have been supplied by other sources if a minimum
fund waiver had been denied.
The PBGC estimate of the losses to the single employer
fund that have been caused by minimum funding waivers is based
on the assumption that funding waivers have not affected the
survival rates of firms, To the extent that funding waivers do
increase survival probabilities, some funding waivers may have
II
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reduced the drain on the PBGC. The PBGC estimate includes only
the losses due to the termination of plans that have received
waivers, it does not include any estimate of plan terminations
that may have been avoided because of funding waivers. To date
there has been no analysis of the effect of funding waivers on
the long term viability of firms.
The PBGC has recommended several changes in the procedures
for granting minimum funding waivers to provide greater
security to plan participants and the PBGC:
1. Reexamine (tighten) policies for granting waivers.
2. Make waiver request subject to public comment to give
plan participants a better opportunity to participate
in the decision to grant waivers.
3. Replace actuaries with financial analysts in funding
waiver process so that viability of a firm can be
assessed.
4. Require plan sponsor receiving a funding waiver to
post a bond, escrow or letter of credit in favor of
plan when appropriate.
Some of the options proposed by the PBGC are
administrative changes. Some of the PBGC recommendations would
require legislative action.
The working group has not reached a concensus on whether
to support the PBGC recommendations. It believes that the
issue of minimum funding waivers needs prompt resolution and
acknowledges that doing so will require addressing a number of
technical issues.
Recommendation: We recommend that a working group be
formed including representatives from the Departments of
Treasury, Labor, Commerce, the CEA, the IRS and the PBGC to
develop a coordinated procedure for granting minimum funding
waivers.
2. Recommendations from National Pension Forum
The National Pension Forum was organized by Secretary of
Labor Raymond Donovan in early 1984 to review and analyze the
effectiveness of the Department of Labor in carrying out its
statutory responsibilities under Title I of the Employee
Retirement Income Security Act (ERISA). The Forum was
comprised of the ERISA Advisory Council, members of Congress
and representatives from the Department of Treasury, the Office
of Management and Budget, the Council of Economic Advisers and
li
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the Pension Benefit Guaranty Corporation. The Secretary
it instructed the Forum to make administrative and legislative
recommendations for improving the Department's ability to
administer-r-Title--I'-i----The--Forum?-requests''Cabinet -Couhcil------ ----____--
consideration of the recommendations, summarized below, which
apply to the organization and structure of the Department
Labor.
The Forum's recommendations are predicted on the
assumption that the pension program cannot expect any
substantial increases in resources or staff. Budgetary
increases could have been recommended as the remedy for many of
the problems facing the pension program. Instead, the Forum
members sought more realistic and long-range solutions by
addressing the structure and organization of the offices which
administer Title I. It is the belief of the National Pension
Forum participants that, if implemented, the recommendations
would greatly improve the department's ability to fulfill its
statutory obligations under Title I of ERISA.
The recommendations are summarized below. The unabridged
version is provided as Attachment A.
A. Information Handling. The Forum urges Cabinet Council
and 0MB approval for the computerization of the ERISA
information management system.
The credibility of the Department's entire effort under
Title I depends on its ability to use the information that
is filed in annual reports. If the Department cannot
dramatically improve existing information handling, it
will continue to be impossible to use all of the
information supplied by the public at considerable cost.
The Department is currently-conducting a pilot project to
determine what benefits such a program would have, not
only to the Labor Department, but also to the other
agencies which administer ERISA.
B. Enforcement. The Forum recommends that the Secretary
extend to the pension program Schedule A hiring authority which
would permit the hiring of lawyers at the investigative level.
At the current time, the ERISA program does not have the
authority to hire lawyers to investigate alleged abuses of
the law before the cases are referred to the Solicitor's
office for legal action. Too often this has resulted in
investigations which have taken years to complete only to
referred back to the investigator by the Solicitor because
the evidence was legally deficient. Schedule A hiring
authority would permit the pension program to obtain the
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expertise it needs to conduct efficient and timely
investigations.
C. Rule-Making and Exemption-Granting. The Forum
recommends that the Department of Labor study the concept of a
self-regulatory organization (SRO) which might be involved in
the prohibited transaction process.
As a first step, a notice was published in the Federal
Register on December 10, 1984 (see Attachment B),
soliciting comments on several aspects of the SRO
concept.
D. Office of Pension Statistics. The Forum recommends
that the Secretary create an Office of Pension Statistics to
collect, analyze and report to Congress on data concerning
employee benefit plans.
E. OPWBP Organization. The Forum urges the Secretary to
take the following organizational steps:
i. Rename OPWBP the Pension an Benefits Commission..
This would distinguish the pension agency from other
DOL agencies and would associate it with the
professionalism of other commissions, such as the
Securities and Exchange Commission.
ii. Designate the principal officer as the Commissioner
with the rank of Assistant Secretary and provide for
the appointment by the Secretary of an Assistant
Commissioner. The responsibilities of the executive
office of the Commission require two political
appointees: one to act as the chief executive
officer and the other to have contact with
Congressional committees, Executive branch agencies
and private sector groups.
iii. Designate the Commission as a separate entity for
budgetary purposes.
F. Public Outreach and Assistance. The Forum urges the
Secretary to devote resources to public outreach and assistance
in an effort to protect beneficiaries, to foster an attitude of
voluntary compliance and to assist the enforcement program.
G. Regulatory Requirements. The Forum makes the three
following recommendations to ameliorate the problem of
regulatory. requirements:
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i. The Forum urges the Secretary to allocate resources
for and place priority on the expanded use of class
exemption.
ii. The Department is urged to re-evaluate information
requirements; and
iii. The Forum urges Executive Branch agencies to
recognize the unique problems of small businesses in
complying with reporting and disclosure requirements
and, so far as permitted by law, to make special
provisions to ameliorate the burden on small
businesses.
3. Single Employer Pension Insurance
A. Financial Status of PBGC Single Employer Fund
The premium that is charged by the Pension Benefit
Guaranty Corporation (PBGC) is set by law. The current premium
($2.60/year/participant) is too low to cover the agency's
commitments. The PBGC's deficit (negative net equity) has
grown rapidly in the last five years and is now almost $500
million. Some of the PBGC's financial problems are caused by
loopholes in the law that have allowed solvent employers to
dump their pension liabilities on the PBGC. About one-fifth of
the drains on the PBGC have been due to terminations by solvent
employers not undergoing bankruptcy or reorganization hearings.
B. Single Employer Legislation
During the last three years there have been legislative
efforts to raise the premium and close the loopholes in the law
but this legislation has died in Congress. All the major
interest groups recognize the need for a premium increase but
they are not anxious to see one. Consequently, there is little
incentive to resolve disputes that arise over other provisions
in a premium bill and coalitions have been fragile. The PBGC
now estimates that a $7.50 premium beginning in January 1985 is
needed to retire the deficit over the next 15 years and restore
the solvency of the fund. Delaying the premium increase only
raises the required premium and increases pressures for a
general revenue bailout.
The PBGC is now drafting legislation to increase the
premium and make other changes in the single employer insurance
program that will be part of the omnibus Budget Reconciliation
Act this spring. That legislation will not be enacted without
strong support from the Administration.
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4. Legislative Initiatives
Several bills to change regulations affecting the private
pension system were submitted in the last Congress.. They will
be resubmitted again this session. Many have bi-partisan
support. The sponsors believe that these changes will increase
private pension benefits and reduce the pressure on the social
security system.
The most important of these proposed changes cover the
following:
A. Vesting - Many plans now provide vesting after 10
years. There will be legislative initiatives this
year to change minimum vesting regulations so that
workers acquire vested pension rights earlier.
B. Integration - Under current regulations, plans that
qualify for tax advantages must offer the same
pension benefits as a fraction of earnings to
workers at all pay levels. Employers may include
social security benefits in the calculation of
replacement rates. As a result, some plans now
offer little or no benefits to workers with low pay
because they have relatively high replacement rates
under social security. There will be bills
introduced this year to change integration
regulations in ways that would increase required
private pension benefits for workers with low pay.
It is difficult to estimate the cost of the
proposals mentioned here but if adopted,
integration proposals would probably impose the
biggest costs on employers.
C. Portability. Portability would reduce the loss in
vested pensions rights that can occur with a change
in jobs. Portability proposals include transfers
of an individuals vested pension rights to a
succeeding plan, required (rather than allowed)
deposits to an IRA, or a central clearing house for
vested pension benefits. Portability issues arise
to a large extent because low levels of vested
benefit can be offered as a lump sum to plan
participants upon termination. Younger workers
often use these lump sum dispersements for current
consumption; they are not saved for retirement.
D. Pension Accrual for Older Workers. In some plans,
pension benefits are increased by less per year (or
not at all) for work past the age of 65. This
practice has been criticized as age discrimination
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and was the subject of legislation introduced last
year as well as a recent EEOC ruling. The EEOC
ruling, which requires continued benefit accrual
past the age of 65, is subject to agency review and
public comment. There is increasing awareness that
many older workers leave the labor force not
because they are forced to, but because they are
encouraged to by the incentives inherent in pension
plans. Pensions have replaced mandatory retirement
rules as age discrimination culprits.
While the intent of these proposals is to increase pension
benefits they may also have unintended effects as well. If
benefits are easily vested, portable, and accrued at any age,
they become in essence, employer-provided IRA's -- tax
sheltered savings, with little potential to retard turnover for
young workers and encourage retirement for older workers.
Employers may have little interest in pensions plans that
provide only the tax advantages that can be secured through
IRA's. No employer is required to offer a pension plan. Few
may do so if pensions provide little opportunity to control
turnover.
Integration will increase retirement resources of workers
at the low end of the income distribution only if these workers
do not reduce their saving to offset anticipated pension
benefits. Because low income is usually associated with low
savings, full adjustment is unlikely. In that case integration
would force many low income workers to consume less when they
are young because their pay will be reduced as a consequence of
a mandated increase in pension benefits. Workers already at
the minimum wage could become unemployed. When wage
adjustments are taken into account, integration proposals
become paternalistic judgements about the way individuals use
their resources over their lifetimes. Some portability
proposals fall in the same category.
E. Coordination. One persistent issue has been the
coordination of pension policy. Many people
believe that there should be a single agency to
make pension policy decisions and that there should
be a "national pension policy" to formulate
retirement objectives. A bill to establish a
single agency was introduced in Congress last year
and a national pension policy was a major topic at
several gatherings of pension experts last year
(the 10th anniversary of ERISA).
While it is true that the agencies that administer ERISA
(Labor, Treasury, PBGC) all have different objectives, it is
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not clear that the resulting conflicts can be reduced by the
creation of a single agency. Nor is it clear that they should
be. The tax advantages of pensions will always compete with
other claims on the budget. This conflict cannot be resolved
with a single agency.
A national pension policy, as it is commonly understood,.
raises serious questions. There are many ways to achieve
retirement objectives and these objectives vary enormously from
one individual to the next. In general, national pension
policies would reduce the flexibility that individuals have to
achieve their retirement objectives.
F. Reversion pf Excess Assets. Legislation may be
pursued in Congress to limit reversions of excess
assets from terminated defined benefit pension
plans that goes beyond the scope of the
Administration's guidelines on excess asset
reversions announced in may of 1984. The
Administration's policy on excess assets is
designed to encourage plan sponsors to create,
maintain and adequately fund defined benefit
pension plans. Broad legislative initiatives which
attempt to restrict reversions of excess assets
could tip the delicate balance between defined
benefit and defined contribution plans and would
discourage the creation, maintenance and funding of
defined benefit pension plans.
G. MPPAA. The Multiemployer Pension Plan Amendment
Act of 1980 established withdrawal liability rules
for members of multiemployer plans. Employers can
be assessed substantial liabilities when they sell
their business or retire even though they have
always made the pension contribution stipulated in
their agreements with a union. In some cases these
liabilities are greater than the net worth of the
business. Withdrawal liability rules have also
created strong disincentives for new employers to
join multiemployer funds, increasing the funding
problems of these plans. Despite these. problems,
there appears to be little hope for any legislative
change in the withdrawal liability rules in the
near future.
5. Administration Activities
A. Risk-related premium. The PBGC is preparing a
draft report on the feasibility of a risk-related
premium: for the single-employer insurance program,
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a study that was required by the 1980 MPPAA
legislation. The current premium schedule is the
same for all plans. Fully funded plans that pose
no risk to the Corporation are charged the same
premium as plans that have large unfunded
liabilities. A risk-related premium would
encourage better funding practices. A risk-related
premium could also be based on a schedule that
would automatically maintain the solvency of the
single employer fund, avoiding the legislative
struggles that are required to change premiums.
Choosing a specific premium structure, however,
will be a matter of some complexity and political
sensitivity.
B. Privatization. One attractive alternative to the
current system is privatization of at least some of
the functions of the PBGC. The PBGC Advisory Board
has set up a task force to study privatization
proposals.
C. Asset Reversions. Terminations to recover excess
assets slowed considerably after the Administration
issued reversion guidelines last spring but they
increased again in December when the Treasury tax
plan was issued. The tax plan includes a 10
percent excise tax on all reversions. The Treasury
has proposed the tax to establish tax neutrality
with respect to a firm's investment decisions and
to make the tax treatment of asset reversions
similar to the tax treatment of IRA's. This tax
may reduce the willingness of employers to
establish and fund defined benefit pension plans.
 NATIONAL PENSION. FORUM
Recommendations for Action by Secretary Donovan
The National Pension Forum was organized by
Secretary Donovan in early 1984 as one of the essential parts
of his commitment to discharge as well as possible the
obligations of the Department of Labor under Title I of ERISA.
The Secretary instructed the Forum to propose administrative
and legislative recommendations to improve the Department's
ability to fulfill its statutory responsibilities under. Title
I, the most important of which is protecting the interests of.
participants and beneficiaries in private sector benefit
plans. Other elements comprising the Secretary's commitment
have included the separation of Pension and Welfare Benefit
Plans (PWBP) personnel and operations from the
Labor-Management Services Administration (LMSA). This process
was effectively completed in August 1984.
The Forum is comprised of the statutory ERISA
Advisory Council, members of both Houses of Congress and
representatives from the Department of Treasury, the Office of
Management and Budget, the Council of Economic Advisors, and
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The public, interest requires that 'the Department of
Labor substantially improve its-prior 1eve1?of discharge of
1. Information Handling. The information contained
in annual reports should be timely. Electronic information
management is the only way to create an ERISA data base which
will support effective enforcement of ERISA's substantive
requirements, responsible discharge of the Department's
research and policy obligations, and for public information
purposes. The present situation is unacceptable.
2. Enforcement. A strong enforcement program is
critical to the administration of ERISA. The current program
is unacceptable and must be improved.
3. Rule-making and exemption-granting. The lead
time necessary for granting exemptions is having an adverse
effect on the American economy in preventing the increasingly
large pools of capital subject to ERISA from being invested in
areas where quasi-judicial action by OPWBP is necessary in
order to authorize the transaction. The Forum appreciates the
complexity of ERISA issues and applauds the quality of the
f<
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RECOMMENDATIONS
ii 1. Information Handling
11
q The Forum urges the Secretary to request Cabinet Council and
OMB approval for the computerization of the ERISA information
management system and for the subcontracting of such a project
to private firms if studies show the system would be more
cost-effective when operated by an outside party. The
credibility of the Department's entire effort under Title I
depends on its ability to use the information that is filed in
the annual reports. If. the Department cannot dramatically
improve existing information handling, it will continue to be
impossible to use all of the information supplied by the
public at considerable cost. This recommendation accordingly
is given the highest priority by the Forum.
ERISA imposes detailed requirements on plan sponsors to
file annual reports, to prepare plan descriptions and to
file and distribute summary plan descriptions. The Forum.
heard substantial testimony which indicated that the
information contained in these filings is not being
effectively managed or utilized. The sheer volume of
filings -- over 800,000 annual reports per year -- makes
4
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7
the pension program.at the investigative level. Litigation
\I; responsibility would remain in the Solicitor's Office,'and
existing collective bargaining agreements would be observed.
In considering the Department of Labor'?s performance with
respect to ERISA, the Forum has been struck by the fact
that ERISA is totally unlike any other law entrusted to
the Department. Not only is the law itself highly
technical and complex, but it directly impacts on
numerous industries, including securities, insurance,
investment banking, real estate,. etc., which have
traditionally not been within the sphere of..-
responsibility of DOL. Additionally, in both the.
regulatory and enforcement areas, close-coordination with
other federal agencies,'such as the Internal Revenue
Service, the Department of Justice, Comptroller-of'the
Currency, and Securities and Exchange Commission,
distinguishes the administration of ERISA from that of
other laws enforced by the Department.
In the enforcement area, ERISA investigations require
detailed knowledge not only of the complex law itself,
but also of the operation of the banking, real estate and
securities industries and the investment instruments
handled by those industries. In addition, banks,
investment advisors, and brokerage firms are integrally
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expertise it needs to-handle the complexity of ERISA.
Such a move would recognize the fact that ERISA is more
akin to the laws enforced by agencies such as the SEC
(which has the necessary. hiring authority) than to the
other programs administered by the Department..
The Forum recommends that the Department of Labor explore the
concept of a self-regulatory organization (SRO). As the first
step in this research, a notice will be published in the
Federal Register soliciting comments on the.ways in which such
an organization might be involved in the prohibited
transaction exemption process.
ERISA confers massive responsibility on DOL with respect
to regulation of the investment of funds by plan
fiduciaries. The law defines very strictly "interested
parties" and prohibits their involvement in certain
investments. The amount of money subject to ERISA (50%
of total NYSE. underwritings in 1983, for example) and the.
dynamic growth of new financial instruments guarantees
continuing pressure on DOL for timely issuances of
rulings. OPWBP has made a conscious decision with
respect to its sparse personnel resources to continue to
 11
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How timing, composition and planning for an SRO
should be structured.
4. Office of Pension Statistics
The Forum recommends that the Secretary create an Office of
Pension Statistics within the Office which administers Title I
so as to enable the Secretary, as the principal policymaker on
retirement income within the Executive Branch, to understand
and anticipate developments as they affect pension policy and
to make appropriate reports, recommendations and policy
initiatives to the Legislative and Executive branches.
Section 513(a)(2) of ERISA authorizes and directs the'
Secretary of Labor to collect and analyze data relating
to employee benefit plans and to report the findings to
Congress and to the President. To fulfill this responsi-
bility, the Forum concludes that a central source of
statistical information should be established within the
Department. The Office of Pension Statistics would rely
on the information contained in the electronic data base.
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13
purposes.
6. Public Outreach and Assistance
The Forum urges the Secretary to devote resources for public
outreach and assistance. The Forum believes that sucha
policy helps to protect beneficiaries, foster an attitude of
voluntary compliance, and facilitate and make more effective
the enforcement program.
In a limited way, OPWBP has devoted. resources to public
assistance as a kind of "preventive maintenance" in the
belief that helping the public reduces the cost. of
enforcement. This practice has been challenged in the
past.. It is the belief of the Forum that ERISA
enforcement is facilitated-by efforts to reach out to the
public in such ways as explaining the operation of the
law, assisting in the preparation of returns, and being
available to answer technical questions. If the
appropriateness of allocating resources to an outreach
effort under ERISA continues to be questioned, the Forum
urges the Secretary to propose legislation specifically
authorizing such an activity.
 C. In evaluating the reporting and disclosure requirements,
the Forum urges the Executive Branch agencies to
recognize the unique problems of small business in
complying with those requirements, and, so far as
permitted by law, to make special. provisions to
ameliorate the burden on small business of such
requirements.
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- 17 -
2. National Retirement Income Policy
With the acknowledgment that national pension policy should
not be construed to dictate individual pension decisions,
certain Forum members recommend that Congress consider
formulating an express National Retirement Income Policy; and
that the policy be explicitly considered when making
legislative and administrative decisions regarding the three
components of retirement income: social security, employer
retirement plans (ERISA) and savings.
The Forum heard testimony from several witnesses about
the need for central policy leadership in the retirement
income area and has determined that such a broad-based
policy directive should come from the Congress.
Certain Forum participants endorse H.R. 3339, the bill
introduced by Representatives John Erlenborn and William Clay,
to consolidate the responsibility for carrying out the
provisions of ERISA into a newly established single agency.
it
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19 -
Treasury, Justice, Commerce, and Health and Human
Services, and a permanent secretariat to be provided by
the Department of Labor. The Council would have had
coordinating responsibilities with respect to
information, inconsistencies and the development of
short- and long-term policies as they affect the
relationship among the agencies. The Order was not
actively effective because it was signed in the last days
of the Carter Administration and was repealed in 1982.
During the last four years, interagency coordination has
been informal. Crises that have arisen have been handled
by the Pension Policy Working Group of the Cabinet
Council of Economic Affairs. A permanent Interagency,
Employee Benefits Council would have the ability to deal
with issues before they become crises. It would also
work in conjunction with any future single agency for
ERISA administration to help achieve coordination with
the many agencies which would not be included in the
single agency.
J,
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that this up tsmall ~titlesi MBesa 's(Sta " il.Aeridlna c n3 tr wo -SROL t-ss% J"
It i at1 atnualatltla;"tirlt6laheY at>s ;
a
d intent
the RejUIatr
(C
Hi a
.v
i
...
..
W. eY 11YYYN] Yecome ,; Janet Brown (202)82 M34
7
l ' Ktt', i
~~: lexibility'Act. S U S G oat. at req. The i lawtdly admitied. parmaaeatresidents
r stab) shment of annual aggregate ' of the United Stites WFFLata(NTART;ti4FOawTto5C She
production quotas for Schedules I and B Notice.Is hereby given that the Department of tabor (the Department) is
controlled substeneesis mandates by 1 r registration pared which was to be responsible for administering the
law and by theb ternational 1e . ii \ conducted Dsusnber3,1M to.., . frduciwT!T sponsibilityprovisions of the
cunlmi??ments of the United`StatessSuch " Decembei'31 'i934-is extended through Employee Retirement Income Security
querns impact predominantly upon ; . January 32,1985 The period of Act of 197.4 (ERISA) 4.Sectiott 400 ot.,
major macufaetur`ers of the affected " registrattiia to betiig extended to;. ERISA prohibits eertain trasa
> ciloii
trrltrol ed'tubstaneas '' 'tlaxirsizathe participation and overall between aplan'and'a "party to intern!"-
Therefore.
under the'authority.vested effeWveness;of`;,the;registration... And sectlon,4975 of?the Internal;Revenue.
in the Attorney General by section 300 Pror?em Code (the Coda) imposes sn'aiieise~ali
of the Cosstiolled Substances Act of.1970 DATCDate:of RegWratioa December 3.. with respect to prohibited tra~"
(21 US'Code aeeilodCO) and . 1984 to January 31x1985. l)etween a plate and'a `disqualified a'
delegated to the Administrator of the on R !R NFOauATloN CONTACT, person". (defined. with certain minor
Drug Enforcement Administration by Joseph D. Cuddihy or F. Gerard e e as the
I 0.100 of Title 28 of the Code of Federal Heinsuer. Immigration Examiners. term "party in intstresto . -? -
Regulations. the Administrator hereby Immigration and Naturalization Service. Section 408(x) of ERISA Lad Sectiorders that the aggregate production 41-3 I Street NW.. Washington. D.C. 4975(C)(2) of the Code provide that 61`
the"
I' quotes for 1994 for the following 20536. Telephone: (202) 633 $m Secretary of Labor and the Secretary of .
controlled substances. expressed In (Sea Tai Immigration and Natbae"I Act (a the Treasury. respectively; may grant
grams of anhydrous bass. be established U.S.C. i505)) administrative exemptions from the
as follows: _ Datati December t 1981 prohibited transaction provisions of
sates t:
cM.O- -
c....ar.
row. s:
eem'I'.44~
I
Dated: November 14, loot
Francis M. NuWm Jr:
Admiaisuomr. Dnq Enfawment
Admtnnttadaa
In. Dee. e..i~ rs.d u.+ar asset
ashen real 44104"
Immigration and NatweRsatlon
service
IW
mum eu w
heals
to issued solely by the Department of
Labors
Organlatlons In the Prohibited '
Transaction Exemption Process
SoOdtation at, commneitts
AQtcCTr Office of Pension and Welfare
Benefit Programs, Labor.
^'ACTIONt Solicitation of comments.
Regbtratlon of Marital Cubwas
AoYNCT: Immigration and Naturalization
Service. just=
Acnalt Notice of extension of
registration period for Mariel Cubans.
SUMMARY: Reference is made to the
registation notice concerning Mariel
Cubans, which appeared in the Federal
Register on November 23, 1984. at 49 FR
46212, requiring the registration of all
persons barn in Cuba or who are Cuban
nationals who are not now citizens of
the United States and who
(a) Arrived in the United States
between April 15. IM and October 10.
1960 (the "Mariel Boatlift"),
Asd:ee-4 Carmictu d h.' ERISA. provided certain conditions are
met. The Secretary of the Treasury's. .
Associate Commissianer.Examinations authority to issue such exemptions was
Irnm:rroQoe anditcnaalisotion Swvica, transferred to the Secretary-of Labor in
$uMMASn. This document requests
comments from interested members of
the public on the feasibility of
participation by self-regulatory
organizedonsin developing. exemptions
from the prohibited transaction rules of
ERISA. The existing prohibited
transaction exemption process has been
criticized, and the Department
anticipates that the public comments
received in response to this notice will
assist it in studying more efficient ways
of handling prohibited transaction
exemption requests.
oATa: Comments should be submitted
on or before February & 1985.
ADDRESS Comments (preferably 3
copies) should be submitted to the
Office of the Administrator. Office of
Pension and Welfare Benefit Programs.
Room Si51& U.S. Department of Labor.
exemption proeess?.partigtderiy as It i relates to complex financial . _. .. ,
trensaetlone. One,method.mtder ; ? r:: .
consideration s whetherthe private,r:- ...
sector might bemore involved in the f
exemption procem Thus. the,',>,,, yin
Department is soliciting comments froth
interested persons with respect tathia'
concept- pi ,. .. 3i~
A. Statutory Provisions
Under Section 4o8(a) ofERISA 5 the
Department may (with certain limited -
exceptions) grant conditional or
unconditional exemptions from all or .
part of the prohibited transaction
restrictions of the Act. Before grantinp-
such an exemption. however, the
Department must find that the
exemption Is (1) Administratively
feasible, (2) in the Interests of the plan
and of its participants and beneficiaries.
129 U-&r- Inst. et seq.
a Rearaaoiratton Plan Number 4 of 1N78 (43 FR
47711. 0.1obe 17.1076). effective December n.
1975 1e4 FR 1065. January 319791
I Except whets the context clearly requites
otherwise nterences In this notice to the various
provisions of Title I of ERISA should also be mad to
trier to the conespondins provisions of the Code.
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t-, r?+?v~tn w.me,ngnts of the plan or plans inoolved. For'exampia - Register .This notice contains ~..; rt t }vt ;
pants p t s aid beitefeiaieee the applicant must indicate whether it . summary of,,the,representatlom made si
Cectu n ,id(s) also ertablshes certain- has ever been found to have enga ed.in' by the applicant tn;fhe exemption
prod
eduial .equtrei#ieats for a prohibited tranaciion or whether-It or,
dm application and a statement of the
ei strati.a exemptions from the' any other pasty in Interest who wrnild exemptive relic' which. the.Department~r.~N
pro:hta?u traasa-tionrules--The'Act be involved in the transaction is. or in,. P, to grant. In addition, the
requt:es :hat the Department establish the last five years has been, a defendant proposed exanptionrequests comments
car exrr-.yen procedure. andthat ' _ in anlswaolt concern osuch
P+ c'i ,..-,ns ' ny be ;. y pcircon's from ti to suallys,within a stated
ony.granted conducts : sa fidumaryo-perty in ., `. period of of tme(uiually4d.dayt). In the
pursaant.to that procedme Inaddition, interest case of a proposed exemption that.
the Dspun-renfmust publish notice of a', Upon receipt, an application for ens. would provide relief from any of the
proposed exemptioninthe Federal:'. individual'exemption i given an reeufetioni on fiduciary conduct in
Register and must assure that adequate' Identification number and is assigned to Section (b10f, F1iLSA, the-proposed
notice of the pendency of the exemption . an employee benefits speelalistin the exemption also Sodrates that any,
.
is given to interested persons. The Division of Exempt)onti of the Office of : Interested person may request Loa
Depa tmantmastalso interested, n Pension aad Welfare tenantPrograms iylthreepeerto the proposed exemption,
persons to present views. In the case of The analyst reviews the application and. The appli cant for a'propoasd
no exemption from the restrictions of If necessary, requests additional exemption must also'assure the
fiduciary self-dealing in Section 406(b) information from the applicanL' Department that notice of the pendency
cf F.R.S.4, the Department may not grant After the exemption application and of the exemptionL given to interested
1the exemptiam unless Itaffords an, any additional material submitted by persons. The nature and extent of such
opportunity for a bearing and makes a the applicant are reviewed, a decision notice varies depending upon the nature
deterr"v:titan on the record with respect generally is made either to propose the of the proposed exemption and the plan'
to the threa findings required by the Act exemption or to issue a tentative denial or plans involved
,;D. T he Exemption Process letter.' A tentative denial letter states After the proposed exemption has
The that the Department has tentatively been published and the comment period
Department administers the decided not to propose the exemption has expired, the Department will -
prohibited transacton exemption and contains a brief statement of the consider any comments submitted. in
'program pursuant to the ERISA Department's reasons for the
Exemption Procedure' (FRIBA determination. I It the will case
tednd t u t a hearing if one f) one is exemption
Procedure 75-1). Under the requested. On a the a sis of e art in procedure. The ERISA exemption procedure also anyspa)with respect interest (or disqualified provides that an applicant may request thdeveloped (including ththe e me
pect to a plan who is or a conference as.of right in the event the application.
omments
any may be a party to a prohibited Department contemplates denying the of the additional src comment
tares any transaction may initiate an exemption exemption request Thw, a tentative from interested ad persons, na, and the.
proceeding by filing an exemption , denial letter will also contain an offer to testimony at any, b6sudoapplication with the Department In - hold such a conference. Exemption the on the
application
any party in hrtered or any conferences are held between the exfinal emption). Department will make a
association or organization prop sod xwith exemption. U the to the
representing ? applicant (or the applicant's .
parties in interest may initiate a class representative) and employees of the - . exemption granted, a notice to tt al" '
exemption proceeding by filing an ? Department and.consist of an informal effect is published In tLe.Pedanl- . >:
exemption application. The Department exchange of views regarding the issues Register. If the Department also propose exemptions on Its own raised by the exemption application. not to grant the proposed exam ion,
notion. If. after consideration of any material d ~ptie. N
An exemption application must submitted b theapplicant a notice is~ ponse proposal a regarding to the tentative.denial lettetter;[and any to the applicant.
the plans involved, applicant or material submitted. or arguments The De
ents
npplicarts. and the transactions for advanced at the conference),the has been meat's aes n1 comments
which relief is requested. This Department een that N city o receives ment
determines that the on the vast au)oritq of proposed information includes a detailed application for exemption should still be exemptions and that most proposed -
description of the fiduciaries and parties denied, it will Issue a final denial letter exemptions are granted as a matter of'
in interest who would be involved In the Informing the applicant of its action and course after expiration of the comment
usage.^.tirrs. c statement whether the providing a brief statement of reasons. period, The De
transactions are customary in the If the Department tentatively decides authority, however, to independently
in'_?lstry in:?ulved and a description of that an exemption application should be decide to deny an exemption that has
the ha: dship or economic lose which granted, it will publish a notice of been proposed.
would result if the exemption pendency of the exemption (notice of Applications for class exemptions are
application is denied. Further, the proposed exemption) in the Federal treated in a manner similar to
application must contain a statement
explaini-g why the exemption would be if review of the .sempaon reti di applications sm some for od fcatd e, Ehit, exemptions. ona .ppptire ed cts. but t groups representing ng classes nee of persons
t
First. trade
that consistent D with
sent statutory findings that the tranwarn toa Is either eat a mpt p
that the e D.pcnment must make in order tron?aaton order FJtrSA er is an exaopt
to grant i:. transaction under an existing Natatory ar who encounter similar prohibited
11
An n, exemption application must also administrative exemption, the Depaftment jr ryWw transaction issues are typically actively
an -interpretive missing- canary attendee to the involved in the class exemption process.
disclose infirmation regarding the n-leveni authorities and indicstin? that. it the Second. since class exemptions by their
previous activitir-s of the applicant and Denannwnt receive so farther aahmissiaa fltret the
appli,ant Mthly So claw !explaining 'shy M:her nature relate to a variety of transaction
relief in neasesaryl? the appiwtion ate will be the specific characteristics of which
at rr. Iesn..c,rtt ta.rr. s? closed without further action. have not been reviewed by the
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Dep trtmcpt.,they:typkally odntuua 1p fAa,Depsttmeal s 3 mars ,,t,... (to fit total transscti j in
s^'r a...t_J~..ai.? ..a .._1?.._J_y._-ie.^'_n..a. -. 9"_tr_.-._._ ;is
eonsiatont with the statutory standards oxratptioa appUuttons-those.seeking interest'+ ' ~T ' ~~""'
Third slave doss exemptions affaeta individual relief as well u,Wou seeking Section 19 of the 1934 Act outline, the
ti
l
.wll! relieve en regarding colt regulatory,
the eaemp clan proceeding bit wino have exemptions that mo
tions Registration of an
not be .a parties,to,the;application. unnecessary. burdens on parties in - r exchange or SRO is subject to public-
cuanrats rceeived in response to a Interest and will be consistent witii the notice and comment procedure and,the
notice' o! ?ro
o.ed te
a
xam
tiona
la
efge null rf o par
n a
ntereat, many can relfef~onid expedite we : _ Cominisslon'a ovs eighF.teapor,aib(Uties
of.whom have ,a substantial Interest in exemption process. and could result in
11
p
p
p
en
p Y Daportmant.,statutory obligations. substantive statutoryrequiraments
::-
en impoiis Si In the proeees of Thus; the Department Is exploring ways outlined in Section ibA .T e
developing s Goal axamptionrtn this in which this increased private sector Commission d
respect. the Department has frequently involw~ent can be achieved. one of kppucsti for r 8~t o any
n.w j egis atiogiseratfom it may
also
conducted lafonnalbeaeingaregerding .. which might be the cancel,
Unea SRO lf,tt fends
propo/ed'thss,exemptions.Inorder to self. regu PaIrticipadoot ion. of a thaat if i if a' ease
latory; o rganic atloa ;' tAhe cd to
" aim
P~
anurs abet the""lewa of all affected in the
Possible Involvement of Private Secctor
Orauizations in the Exemption Process
A. Involvement of Private Sector Croups
Under the Existing Procedures
The legislative history of ERUSA
Indicates that Congress intended that
the Department administer the
prohibited transaetionexemption
program so as not to disrupt
unnecessarily the established business
practices of financial) Institutions that
provide fiduciary services to employee
benefit plans.' Accordingly, private
sector involvement in the prohibited
transaction exam don praass is bath
appropriate-and necessary in order to
One area in which self-reg datory Rules and regulations proposed by an
organizations play a very significant SRO must be submitted to the
r?+~trt r r.2_... ..1.L
carry out Congressional Intent Industry
groups no==:;!Y significant
role in the lass .
exemptions from the prohibited
.transaction rules,?but have little. If any.
role in the individual exemption process.
Industry group submissions have often
served as a valuable resource in- , :"''
idea:ift ing areas where relief from the
prohibited transaction rules is needed.
The utility of trade group submissions to
the Department is limited however, in
two main ways. Fist such submissions
often focus on the affected industry's
need for relief from the prohibited
transaction rules rather than an analysis
of the ways In which the Department
can fashion exemptive relief that is
consistent with the statutory factors that
must be satisfied before an exemption
may be granted. Second industry
submissions often involve sophisticated
financial transactions, but do not
present the factual material in the way
that is most useful to the Departments
staff In making a decision.'
? H.R. Rep. No. 1=723d Cory.. rd S....:err
I:974;.
' For .nmplt an Indu.ty aaaodatlon's
submissions often contain eery pmenl stat.meat.
,t f cis but do not di.cun die rp... between its
.rions m.mbm' business prscu. In addltitm
the submtsstons ohm tadode Voluminous
federal securities laws. The Securities
and Exchange Commission (the
Commission) is the agency charged by
Congress with administering those laws.
In discharging Its duties, however, the
Commission makes use of a variety of
private sector self-regulatory.
organizations (SRO's). These - ..
organizations perform-same rolemaking.
investigatory and enforcement functions
opportunity for public notice and
comment. I 1 The Commission retains the
authority to amend all rules of an SRO
and it may even "summarily abrogate"
them If It finds such action necessary in
the public Interest &2; .
The National Association of Securities
Dealers, Inc. (NASD) Is the one
organization registered with the
Commission under Section 15A of the'
for. and under the'dieetion of. the .? . %9:N-A4n. NASD Is principally charged
Commiasion. The functions of these ;:- with promulgating; maintaining and
organizations an not`com tel enforcing a code of business ethics'.
analogous to the functions 1 that welt Y ` """`-` among oveo-the?counter brokers and
, .
regulatory organization might perform dealers.is Whfie membership In NASD
under MUSA.,b'ut the Depattmant ` - lie members alitbro thus subject beleives their existence illustrates how dealers to
T
private entities may play on important - Its investigatoty.and disciplinary
role Inc 'federal regulatory program-, powers..'!: Members are generall
registration of SRO's to establish and
promote ethical and standardized.
principles of trade In the securities . '
business.s Registration by SRO's with
the Commission is permitted only if the
Commission determines that such an
association is organzied so as to be able
to comply with the Commission's rules
and regulations as well as to enforce
compliance among its members.
Procedurally. the rules of an association
must ensure that directors are
representative of the differing Interests
in the financial community;
substantively, as association's rules
must be designed to "prevent fraudulent
and manipulative practices. to promote
just and equitable principles of trade
backpound au:vial ba: do not inclwL a st:ddant
summary of the contents of to b.ckpound maternal
or a meaningful .aptnstioa of its significance.
? Securities Eachanp Am 9(193L at omen46
Section 13A. U StL IU70 (19U); 13 USC Section
MW N9ar). hemah r "1934 Act"
. NASD'a membership is divided into 13
districts whose members elect some of
the members?of NASD's Board of ,-.. -
Directors; other seats In the Board are
reserved for representatives of industry
and the professioaa.?As of 1983, there
were 299.000 registered representatives
,of the investment and securities
(ndustry.'and 48.85 member firms.
Membership may be defnied to or
withdrawn from anyone suspended from
a registered exchange or anyone
convicted of a misdemeanor or felony
involving such offenses as
embezzlement, misuse of funds, or?abuse
of a fiduciary relationship among others.
? laic As.. Section 33A(b)(2)? le). (6)
"19M Act. Section 19 (a) (14
612934 As. Section is (b) (14
'? 1934 Asti. Sactloo 19 (b) (3) (c).
"SEC. 'Rh. Wotit of the SEC" 13 (Febrwry
lone}
14 NASD. An Introduction to NASD." 1s (1964).
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div -?? ?_ --???r ?~~~ ~. mires - NASD 's activities and reputation have established fa,lfi7J.,[adts'
I
sier.5q Let cl and Compliane , allowed tlieFederel'goycrtuaent to Omit ,.. Series Raleaae,l the A"inion g.
11
i.fenbet 'and,Market`Sernees;;aads4. z Itrlnvolveme t and expenditutres iii anno;tneed,lhatl tended to kook at
Actor.. elan; WiLh!, sects division are monltoetntt the activities of the securities ..,, accounting principles established by
iariass departments charged. with industry. Howeve_,`thefact thdt,the FASB in a
dcu rlr,.irq and ado stering regulations Camniiaslon ma ease its d nit terirrg'thafederal
C !%J S,:r.?ia.t for di7crent segments of involvement in t}a regulation securities lawe s izin,T that prld-
I the 5:cu=ties indue Tile Legal of the sector resources and ex
~ 7 and securities Industry 'at anytime and expertise exceeded
Compliance Dtv'sion has promuIgated a its owThthe,SEC'etstcdthat dt endowed
etice -e bo hCodoef . which are undoubtedly sdvngthel:s Lie industry's the .establlshmert'of the Noahafiecause
of r-r . welt " as lutes commitment to a?caningful self It provided ?"era iastitlitiorla( fit rework
f1F Jr P regulation
su, m e for approtalto the, SEC and nsible rmffplowing
v r
.hl-h arc Llie standsrds witch 2' FmovaAccotirtog S zatiods. res respo.acti i-i fem,
against
secu:ines transactions conduct Is - Anotherpriprvte sector organization research eearch and eomiaoderitlon "of caryiny
generally caged. oceasionall . NASD upon which the Commission utor rcl es to aid viewpoints"
has adc'ptcd rules in Bea of rgid it in discharging /tli statutory FASB'a standardse
)Proposed or threst' nlieu othe regulation acb responsibIlities is Uhei inancal .. *conducted under iorniil f s, is
en tit se a >^ardishg "free Accounting Staadards Board (FASB). procedure similar ormd"r
a sithht,), tag i s' tiding ? sad The legislation creating the Commission to"ibe ommksioas
own, which invite and consider broad.
NASD staff at the district level gave it the authority to develop and based public Ismmentas With regard to
cond. is a.Liual examinations of promulgate accounting standards to research and policy development. FASA
member,' books and records: it is from assure proper compliance with the also makes public its proposals and
this ber;v that complaints against financial disclosure provisions of that solicits suggestions and criticisms.
M time v Ce typically arise.'* These audits Act. The Commission also has Ultimately, it is the Commission's .
ccaducr typ any a ise'* Th se basis. authority to prescribe accounting responsibility to ensure that,
$ books to Act. I I The Cdeat standards and procedures for disclosure fs made in the fnanci l to
ccnduce d On aft t
comp."arce with association rules. At compliance with the other three major statements filed under federal
he spine time. NASD stag monitors acts which it odministcs.to laws. In order to fulfill this - ka>rlnes
tcomplil
he se once with the SEC's Net Capita Historically. however, the responsibmJty. the Commission
Rifle and the Federal Reserve Board's Commission felt that reliance an maintains an active and ongoing
r, Regulation T.n accounting principles established by oversight role of FASB. As with the
Afeaber firma or individual violators practitioners in the private sector was NASD. the Commission has reserved the
of NASD standards are subject to preferable to promulgating standards of authority to establish its owe sulea of
sanctions imposed by NASD which its own. Thus. the Commission has accounting if private sector initiative is
range from tea chosen to maintain an oversight not satisfactory. That for. however. the
expulsion. NASD has Internal review toward the accounting Profession. ro1Tbe Commission has not ""an the need to do
procedures in place under which Commission's first chief accountant s0.88 Of eighty standards prof
nlgstad
members may challenge a disacipptin stated as easy as for that the policy of by FASB since 1L
decision: appeal Le also available to the the Commission was "to
d: '
em Comit don has el
d
sa
tpeesss
funnel
Commission and ultimately. to the educe teats to develop uniformity disagreement only oncW The
courts
Olii
e ?
verv r
of procedure thems
l
l
h
.
are
e
y,
ves
and to
owever. has
;?
this external appellate procedure been step in recently. as a last resort-tI
invoked. Notice of expulsion of a' More recenently. the Commission
member is released to the press. reaffirmed Its commitment to rely
although lesser penalties may be kept generally on private sector initiative in
confidential by the SF.r, formulating financial accounting
NASD provides a range of services to standards. A group established by the
Its membem. In addition to maintaining Amerlccn institute of Certified Public
an over-the-counter quotation service, Accountants (AICPA) and chatted by
NASD has an Information Department forma Six Commissioner Francis M.
which publishes newsletters, press Wheat conducted a study of the
releases and various educational accounting standards area and .
booklets. These publintiom recommended that a private sector
co p:r t enfo:cerwent activities and organization would be most capable of
serve as a form of preventive regulation setting standards for the accounting
In cdditina. the Association conducts Profession As a result of this
seminars and conferences to infcm recommendation, the Financial
member of current issues as well as to Accounting Standards Board was
s
olicit mcinber views on matters
affeelin; l.^.cm.ta
"S., 5rner0r. Mark white. The National
Aisn_:c:,; n: !Ser.;uiries Deo/na. r,L a Gea.
w'anh. LRer O. rya 119594
" Tne p.ailc as well as ethe NASD mambas
may shin :ni!w. a complaint
"Su-. SFt N., Cspii,: Rule If 17\CFR 210.150J-
1: F.drr::l R??'r -n Onard Regulation T 11 12 CFR
z?o.u-z~.a.
"SEA at 1934 sectioo IZfb). 25 USC section
751(b).
9*The Securities Act of 193j, section 7.15 USG
779 and schedule A. The Public Utility Holdtmt An
of Iwo. accti,m 5(b). 13 U S.C 79b. 79d and 79e: The
invcatmeot Company Act of 1010. section 0.b. 13
USC sosd(b).
working relationship to alert each other
to perceived issue and potential
problems in the Industry. Their,
relationship has been'deamibed as one
of "mutual Nan-surprise." w
FASB performs no major enforcement
activities. Rather. compliance is
compelled by the Commlaslon ai part of
its general enforcement program. Where
an accountant has seriously departed.
from professional principles, the
Con:3sicn may institute disciplinary
proceedings under Its Role of Practice
2(e).2111 Accountants may be barred from
further practice before the Commission
or may be permitted to practice only
under certain conditions.
The Board has seven members who
are elected by its sponsoring
organization the Financial Accounting
as FASO. 'Facts About FAS$_ Relationship, vii,
the Federal Goverttmmd,' *1 1-4 (11 ).
as Sw
enare
SE
F
Y.
:C Report to Coove , -rhs
T"Grain C 11101111116 Coaumnu in a Round Accnuntinp Protsadan sad the Comntis.iou,
able on -Developments in Aceoun:ina T1wory and Oversight Rol : Qalr L true),
Practice Since 1rn- Ancrican institute of to FA."a._ 'Fans About FASa 111951).
Accow.tont. Stith Annivenary CG/ebronon at inc a SEC Rule. of Practice, en mdIRed at it CrR
(19374
Sm.1 tic 0..p.
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 Sanitized Copy Approved for Release 2010/04/27: CIA-RDP87M00539R002303820016-4=^,ot"
p :Ir I'G Se'i tc-e,'r~rparues
InnI'to.Woatifythe ,+.,;;addr in ihisisiue'shouldIdentify, the`;
.?. rn nsltrr i.s:r:r: pavice torte 9 ! 1J,, ,t VtM D.C !11184th diy of
lortonea to the
'
'
,? pup or groups lhat
a self Ikeembor 291L
inighf, acnrnd
eta ncaartlc?rsan? to to rat rosoa tlve he the he Iss issuJes, and regulatory function end desbe'thrtr AWN"
ar.~ .zeta
A G. Trtoeks. ? ? ,
_,_
ts?z a rot ^sts, an wEtnin the rmdncr? of ."..Rrhether the-2 is:anpInterest on the Adrinisrrum .O ,.T.Ce ofPruianand 1,
ti,4r.?e
_ ` B,e TJI Perm.
, 'nn r:.ac'?.r.:nc stntutc. part of oiieor m oreswupeof Cditeiarrs. > -u UoitedSt tesD.Portment
or ether pcMie~ in mt,ettat in ., o'Jaha
it !, .licvc. that p vste nstoLt ahing and cuppotttns self, . ,
rr7'.!:..floe, n? y be shin to perform an- re lstory o nizations Comments i'aaczracsa
tmpr:lt -' rule in developtn class asttaooooe dste?aw ,?-
g addressing this Issue
shoa!d identify the ,. ,....
cxem~aons'throcsh the use of a
negotiation" :Cc?It_zique similar to that
aercribed above. Participation. by an
Sn0 in such aprocess would appeal: to.
huve;irrtieular potential because the
SRO would, over time, develop a high
crg,ee o! expertise in dealing with -
issue; seising under the prohibited
!zany.^.ac::, is atERISA,
A :`i:_ possible role for a self.
reg-.ia.ery o:;antzation might arise if
au ? an organization possessed a very
high degree of irtdvpendenee from its
suppcrtir. ; membership, if its
membership adhered to high standards
of conduct developed by the
uranlzatirn and if the self-regulatory
crgenization could compel adherence to
those standards by Imposing meaningful
disciplinary actions. in such
circumstances, the Department might be
able to fashion a class exemption under
which relief would be conditioned (in
whole or part) on membership in the
self-regulatory organization. A self.
regulatory organization would need to
be very well-established in order to play
such a rote. however, and the
De,-crtment and the public would need
to have a high degree of confidence In
the organization in order to make the
findings rsgaired for such an exemption.
Accordingly. the Department believes
that it is premature to consider whether
a self-regulatory organization could
ultimately perform this function.
The Departmert is conducting an
irtere!: a study of the fea:ibility of
mskir.; use of PC'!-regu!a:ory
organizations in the administrative
exemption process and believes that
t.omm::ts from interested members of
the pubic will be of significant
?Nistance in conducting this study.
."..'though the Department invites, and
trit! consider. comments on all aspects
:;f ate SRO concept. it specificall;-
., ?:itrc comnent; on the fo!lowin,:
1.:'ethcr any existing private
:reaps have the essential chcructerisrics
t-i inurpc:ldrnce. c::ocr:ise and
?,:n:incity to rent as a se!f-regulatory
'~-;,:.niraticn in the context of the FRISA
r-rc:ess. Corrmr:nts
the purposes of any, proposed
o ganlzsUoa NATIONAL C0MM 1=0N 0N_.1* ..
3..Whother there arc any practical .AGRICULTURAL TRADE A!I'D''EXPORT
impediments to the use of self regulatory POLICY
organizations in the ERISA exemption
process. In this respect, the Department
is particularly interested in comments
addressing the potential conseque.".crs
of application of the Federal Advisory
Committee Act (FACA) to the activities
of a self-regulatory organization."
FACA applies to any group that is
established or utilized by a Federal
government agency "in the interest of
obtaining advice or recommendations."
Among other things. PACA requires that
the advisory committee operate under a
written charter. that It hold open
meetings and that It perform solely
advisory functions,"
4. Whether some form of "negotiated"
procedure could be used.by the ...
Department in developing prohibited
transaction class exemptions. .
S. Whether there are other functions
that a sett-regulatory organization might
Perform. For instance,:could an SRO
compeI adherence to high standards of
conduct developed by the organization
through the imposltion,of meaningfui
disciplinary actions?
Three copies of each respondent's
comments should be mailed or delivered
to the Administrator of the Office of
Pension and Welfare Benefit Programs
at Room S432L U.S. Department of
Labor. 200 Constitution Avenue N'W_
Washington. D.C. VIZ. 10, and should be
marked "Attention: SRO Inquiry."
Comments should be received on or
before (insert date 60 days from date of
publication in the Federal Register).
All comments received by the
Department Mill be available for public
inr.pection and copying in the Public
Disclosure Room of the Office of
Pension and Welfare Benefit Programs.
Room N4677, `00 Constitution Avenue.
NW" Washington. D.C.
S U.S.C. App. It. "r Generol son:ors
AdminStr,dior. has issued interim nP.llcrirrs under
:hr Frdtni Advisory rnm-nve Ac. 41 CFR %p1-
d.a m. >r... J.
Administrativa Committee; Notice of
Meet;ng
The Administrative Committee of the
National Commission on Agricultural
Trade and Export Policy will meet in
Washington. D,G on December it 1984.
The meeting will be held it. Room 1300,
Longvtorth House Office Building,
Independence Avenue. Washington,
D:C. at 901 am.
Matters before the Admialatrative
Committee will include the selection of
a staff director and the development of
the Commisdgn's future agenda. The
Commission invites Individuals
interested in applying for.the position c
Staff Director of the Commission'to .
make known their intent by sending
information relating to their past
experience andqualifcations to. Dr.
Kenneth L Bader, Chalrman,'t %='
Commission on Agriarlturiaf Tiede and
Export PoL'cy, r, 7 Craig R I 'Post
Office Box V= SL Louth, Missouri
63141. The deadline for receiving such
applications Is December 18.
Applicants for the position of staff
director will be Judged according to the
following criteria- _ ,
(1) Familiarity with the resources of
(2) Familiarity with trade Issues;'
(3) Evidence of administrative abditr,
(4) Evidence of leadership skills.
The staff director of the Commission
will act as the principal coordinator or.
all staff activities in support of the
Commission under the direction of the
Commission Chairman.
The National Commission on
Agricultural Trade and Export Policy Is
an independent Commission established
pursuant to Pub. L 96-412
Kenneth L Bader,
Chcin :en.
11A Ott. M-3.1 a F.kd 12>c *AS ml
eLLlass Cues aliases
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