Abstract: Expanding Connections between the New York Stock Exchange and the Employee Retirement Income Security Act

Paula Gajewski


The purpose of this paper is to document and analyze connections between the results of the deregulation of the New York Stock Exchange in 1975 and the passage of the Employee Retirement Income Security Act of 1974 (ERISA). The removal of fixed commission rates prompted stockbrokers to change the way they provided research services, and to seek more individual investors as clients. New standards of fiduciary conduct under ERISA increased the importance of brokers' research capabilities, providing a larger market for brokers, while simultaneously expanding the responsibilities of pension fund managers. Many of ERISA's other provisions increased the time and effort necessary to run a private pension, prompting pension managers to alter or terminate plans, in favor of more individualized pension arrangements, such as defined-contribution plans. The combination of increased fiduciary responsibility on the part of pension managers and greater attention to, and opportunities for, individual investment helped shift the burden of investing for retirement toward the individual employee, and away from the corporation. Deregulation and ERISA combined to provide encouragement and opportunity for individual retirement investment.

BEH On-Line Paper