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authority or control over the assets of a Group IRA

trust or pooled trust in which its assets are invested,

and certain other persons, are "fiduciaries" with respect to the trust, as defined in Pension Act section 3(21), and are subject to the fiduciary responsibility standards at Pension Act sections 401-414.

Without attempting

to exhaustively describe these standards, they include discharge of the fiduciary's duties (A) for the exclusive benefit of the participants and their beneficiaries and defraying reasonable expenses; (B) in accordance with a prudent man standard; (C) under specific injunction to diversify investments; and (D) in accordance with the plan documents and instruments.

Liability is imposed

for certain breaches of duty by co-fiduciaries.

There is a specific duty to embody the plan in

a written instrument and to hold assets in trust form. Prohibited transactions, similar to those under the tax provisions, are proscribed under Pension Act section 406, and there are prohibitions on certain persons holding certain positions under Pension Act section 411. The trustee of a Group IRA trust will be subject also to the prohibited transaction rules, and the excise taxes imposed thereon, at section 4975 and the reporting requirements of section 408(1), as developed by the Secretary of the Treasury.

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Reporting, Disclosure and Fiduciary Standards

IRA Trusts

By its nature an IRA trust created by an individual without employer or employee association involvement could not be an "investment company" under the Act because of the exemption at Act section 3(c)(1) for

any issuer whose outstanding securities

are beneficially owned by not more than one hundred persons and which is not making and does not presently propose to make a public offering of its securities.

If this exemption is deemed by the Commission not to be available in the case of a series or group of IRA trusts created by employees of the same or a related employer

or by members of an employee association because of employer or association involvement in their establishment, presumably such a group of trusts would also be considered by the Department of Labor to be a Group IRA trust subject to the reporting disclosure and fiduciary standards discussed under the preceding heading. If there is any other basis on which section 3(c)(1) would be deemed unavailable by the Commission for an individually created account, we would appreciate the opportunity to comment. As indicated above, an IRA trust established

by an individual without employer or employee association involvement, is exempt entirely from Title I. Such an account could be held by a bank in custodial form under

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section 408(h) and although the custodian will be

treated as a trustee under section 408(h), the obligations

of the bank will be determined under local law, which

will vary from state to state.

Continental specifically represents that it will

hold the assets of an IRA trust only in a fiduciary capacity and, as such, will be subject to Regulation 9 of the Regulations of the Comptroller of the Currency. Under Regulation 9.11, Continental will be subject to the duties and fiduciary standards imposed under Illinois law. In addition, a national bank is prohibited from selfdealing with respect to accounts held in a fiduciary capacity, and is required to maintain such accounts separate from other assets.

Although exempt from the reporting and disclosure provisions of Title I of the Pension Act, the trustee of an IRA trust will be required to make such reports regarding the account and the participants regarding contributions and distributions as the Secretary of the Treasury may prescribe under regulations. Further,

the Conference Report states:

The conferees understand that the Internal Revenue Service anticipates developing a prototype individual retirement account which would include a

full disclosure of all the material elements governing the retirement savings deduction.

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This prototype plan would qualify under

the requirements for an individual retirement
account. Other plans would be required to
seek prior approval from the Internal Revenue
Service and the conferees expect that one of
the requirements for approval would be a dis-
closure statement of all the material elements
governing the retirement savings deduction.
The conferees also expect the Internal Revenue
Service to develop a pamphlet which sets forth
the restrictions and limitations with
regard to the individual retirement accounts,
including, for example, the penalties for
premature distributions, the fact that the
account is not eligible for estate and
gift tax advantages or the lump-sum distri-
bution rules that qualified plans are entitled
to. It is the hope of the conferees that such
pamphlet would receive wide distribution

so that individuals would be fully informed on
the restrictions and limitations of

such an account. Also, in accordance
with regulations to be prescribed by
the Secretary of the Treasury or his
delegate, there is to be disclosure of such
matters as load factors for insurance
contracts and earnings factors for individual
retirement accounts. These required dis-
closures are to be made in layman's language,
and civil penalties are imposed under the
substitute for failure to adequately dis-
close. Conference Report, p. 338.

Reporting, Disclosure and Fiduciary Standards Collective Trusts

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The fiduciary standards provisions of Title I

of the Pension Act will be applicable to the trustee and
any investment manager of any collective trust in which
the assets of any Group IRA trust or H.R. 10 or
other section 401 qualified plan are Invested because
such persons would be fiduciaries with respect to the
participating IRA or 401 qualified trusts.

The reporting and disclosure provisions will not

be applicable to a collective trust as such. However, Pension Act section 103(b)(3)(G) requires that the report of a

participating trust include the most recent annual state

ment of the collective trust and the Secretary of Labor

may provide for the filing of a master copy under Pension Act section 103(b)(4).

Accordingly, to the extent the

assets of an IRA trust are invested in a collective trust
which also includes Group IRA trusts, there is a spill-
over of the application of Title I. Such a collective
trust will be subject to the fiduciary standards of
Title I even though the participating IRA trust will
not and the same annual report will be prepared and
available, for the collective trust, even though the
reporting and disclosure requirements of Title I do not
apply to the IRA trust itself.

Application of Federal Securities Laws to Other Forms of
Pension and Profit-sharing Plans

Individual and collective trusts for H.R. 10

plans and other pension and profit-sharing plans qualified
under section 401 are specifically exempt from registration
as investment companies under the Act where "maintained
by a bank" pursuant to the exemption at section 3(c)(11)
of the Act, as amended by the Investment Company Amendments
Act of 1970. An interest in such a trust would be exempt

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