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Past Event
24 March 2011


  • Lennine Occhino
    T +1 312 701 7966
  • J. Paul Forrester
    T +1 312 701 7366

The Perfect Storm: Proposed Rulemaking by Three Agencies Threaten the Legality of Derivatives Transactions with ERISA Plans

The Department of Labor (“DOL”) recently proposed amendments to regulations defining who is a “fiduciary” for ERISA purposes. These regulations have been relied on for over 30 years by service providers and counterparties to ERISA plans. The proposal would significantly expand the scope of “fiduciary” to include certain persons who make recommendations regarding investments and transactions or provide valuations, raising concerns that customary broker and dealer services provided to ERISA plans may cause such service providers to become fiduciaries unless such relationships are carefully structured. The DOL proposal is independent of rulemaking by the Commodity Futures Trading Commission (“CFTC”) and Securities Exchange Commission (“SEC”) under the Dodd-Frank Act to establish business conduct rules for counterparties and advisors to “Special Entities.” Recently proposed CFTC rules have drawn criticism because they would impose fiduciary duties not contemplated by the legislation. Furthermore, when combined with the DOL proposal, derivatives transactions with ERISA plans would effectively become prohibited transactions under ERISA because they would no longer be eligible for prohibited transaction exemptions customarily relied upon by plans and their investment managers for such transactions.

Fiduciaries to ERISA plans and their investment managers, as well as counterparties that enter into derivatives transactions with ERISA plans need to understand the implications of the DOL’s proposed revised definition of “fiduciary” and its effect when combined with anticipated SEC and CFTC regulations.

During this GFMI call, Lennine Occhino and Paul Forrester will address:

  • The DOL’s proposed definition of “fiduciary”
  • What are “Special Entities?”
  • How the CFTC’s proposed business conduct rule would interact with the DOL’s revised definition of “fiduciary”
  • How to tell if you are an "advisor" to a Special Entity
  • The current state of SEC/CFTC/DOL coordination
  • What steps parties to ERISA-governed derivatives transactions should take now
  • The potential impact on investments and hedging

Of Related Interest

Strategies for Dealing with Financial Asset Businesses and Portfolios – Part III: Joint Ventures and Restructurings for Financial Asset Businesses and Distressed Portfolios
Teleconference 3/22/11

The Dodd-Frank Wall Street Reform and Consumer Protection Act
Legal Update

Recent Teleconferences

Strategies for Dealing with Financial Asset Businesses and Portfolios – Part II: Structured Finance Alternatives for Financial Asset Businesses
Teleconference recording: 3/10/2011

Strategies for Dealing with Financial Asset Businesses and Portfolios – Part I: M&A of Financial Asset Businesses
Teleconference recording: 3/3/2011

Mayer Brown's Global Financial Markets Initiative helps clients deal with the legal and business challenges resulting from the ongoing turbulence in worldwide financial markets. By mobilizing the firm's global resources from multiple practices and offices, the Initiative provides clients with knowledgeable and timely counsel on a broad spectrum of their legal needs.

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24 March 2011

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