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Department of Labor Issues Final Rule on Securities Cross-Trading for ERISA Accounts

October 27, 2008

By Larry Hass, Josh Sternoff and Rebecca Cambreleng

This month the U.S. Department of Labor (DOL) issued its final rule on cross-trading of securities for actively managed ERISA-covered accounts. This rule was adopted pursuant to the statutory cross-trading prohibited transaction exemption set forth in Section 408(b)(19) of ERISA, which was enacted as part of the Pension Protection Act in 2006. The enactment of Section 408(b)(19) was generally considered to be a legislative victory for proponents of cross-trading who had been frustrated by DOLs reluctance to issue an administrative exemption for cross-trades beyond the scope of its class exemption covering cross-trading for index and other passively managed accounts. In February 2007, DOL issued an interim rule pertaining to the cross-trade policies and procedures required by Section 408(b)(19). The final rule makes only minor modifications to the interim rule.