Certified Valuation Analyst (CVA) Practice Exam

Which body issues regulations pertaining to Employee Stock Ownership Plans (ESOP)?

1. SEC

2. DOL

3. IRS

4. FASB

The correct answer is: DOL

The Department of Labor (DOL) is the body that specifically regulates Employee Stock Ownership Plans (ESOPs). The DOL's involvement stems from its role in enforcing the Employee Retirement Income Security Act (ERISA), which governs the management of private sector employee benefit plans, including ESOPs. Under ERISA, the DOL sets standards for the operation and management of these plans to protect the interests of plan participants and beneficiaries. The DOL ensures that ESOPs comply with reporting and disclosure requirements, fiduciary responsibilities, and other operational mandates to ensure that employee benefits are adequately protected. This regulatory oversight is crucial for maintaining transparency and fairness in how these plans operate and how the employees' interests are managed. In contrast, while the Securities and Exchange Commission (SEC) regulates securities transactions and disclosures, the Internal Revenue Service (IRS) is primarily concerned with the tax aspects of ESOPs, ensuring compliance with tax laws, and the Financial Accounting Standards Board (FASB) sets accounting standards. However, it is the DOL that directly oversees the regulatory framework and guidelines specifically applicable to the administration of ESOPs.