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Overview

The Department of Labor recently issued guidance on a company's obligation to file an annual Form LM-10. The guidance came in the form of "frequently asked questions" or "FAQ." The FAQ states that investment advisory firms are required to report the total amount of loans or payments (including meals and other marketing expenses) made to unions and their officers, agents, shop stewards, employees or other representatives, and union appointed trustees of Taft-Hartley plans. The FAQ specifically lists marketing expenses, including meals, receptions and dinners, golf outings, etc. as reportable payments. The FAQ specifically states that, “for example, if an investment management firm offers a union official the use of a vacation home or paid travel and lodging in an effort to establish a business relationship between the firm and a pension plan for which the union official is a trustee, the advisory firm would be required to file a report disclosing the gift.” Form LM-10 provides a de minimis exception for sporadic or occasional gifts, provided the aggregate value during the fiscal year per recipient is $250 or less.

If your firm is subject to the reporting requirement, it is extremely important that it file the form promptly this year. The reporting requirement has been in place for several years, but under a special enforcement policy and grace period, new filers will not have to submit reports for previous fiscal years provided the 2006 report is filed on a timely basis. In other cases, the Department of Labors Office of Labor/Management Standard may seek reports for the five previous years. Investment advisory firms must submit reports and maintain records for fiscal years beginning on or after January 1, 2005. Forms are due ninety (90) days after the end of the firm’s fiscal year. If your fiscal year ends December 31, your first report on Form LM-10 must be filed by May 15, 2006.

If your firm did not have procedures in place for tracking and reporting such payments during the last fiscal year, the certification and attestation required on the form can be modified pursuant to the guidance provided in the FAQ. Future Form LM-10s will require full certifications and, therefore, investment advisory firms should implement procedures to track and record the appropriate data.

For More Information

Please contact Richard S. Heller, James P. Jalil, Donald S. Mendelsohn, JoAnn M. Strasser, or Michael V. Wible or any member of our Corporate Transactions & Securities practice group for more information.

Disclosure

This advisory may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions. Some of the design images and photographs in this document may be of actors depicting fictional scenes.