Regulation

Department of Labor Issues Fiduciary Regulations Under ERISA

The Department of Labor (DOL) issued its long-anticipated final regulation (the "Regulation") defining who is a fiduciary as a result of giving investment advice to plans subject to ERISA, to participants or beneficiaries of these plans, or to IRAs.

The Regulation significantly expands the categories of persons considered fiduciaries from the regulation it replaced, which was issued in 1975, but generally relaxes many of the requirements contained in the 2015 Proposed Regulation, which immediately preceded the final Regulation.

For additional discussion and analysis, our Client Alert is available here.

SEC's White: Fund Directors Should Provide Oversight, Not Management; Consider "Emerging Problems of Tomorrow"

In a speech to the Mutual Fund Directors Forum (MFDF) on March 29, 2016, SEC Chair Mary Jo White acknowledged that regulators should not completely overload fund directors with additional responsibilities or confuse strong oversight with micromanagement of a fund. The SEC must "be sensitive to where a director's oversight responsibility could cross the line into day-to-daymanagement," she said. Drawing an appropriate line is a challenge, she added, "one that the SEC is grappling with" as it considers proposed rules governing liquidity risk management and derivatives, among others, that are "designed to address the increasingly complex portfolios and operations of mutual funds and ETFs."

For additional discussion and analysis, our Client Alert is available here.

SEC Proposes Limits on Fund Use of Derivatives and Leverage

The SEC recently proposed rules that would limit the amount of leverage that mutual funds may obtain through derivatives. Rule 18f-4 would require funds to comply with an "exposure-based portfolio limit" or an "alternative risk-based portfolio limit." The proposals would also require funds and business development companies (BDCs) to manage the risks of investing in derivatives by clarifying requirements to segregate liquid assets to "cover" their potential exposure to derivatives. Finally, the proposal would require funds that make extensive use of derivatives or utilize "complex" derivatives to establish written derivatives risk policies and appoint a derivatives risk manager.

You can find additional analysis and initial impressions in our Client Alert, available here.

Derivatives Rule Proposal: More Work for Overburdened Fund Directors

The SEC's proposals to modernize its regulation of fund use of derivatives and leverage again increase the scope and complexity of the responsibilities of investment company fund directors.

For additional discussion, Jay Baris, in an article in Fund Board Views, describes what directors need to know about the SEC's proposals and how the proposals could affect them. The article is available here.

CFTC Announces Its Largest Whistleblower Award to Date

On April 4, 2016, the Commodity Futures Trading Commission (CFTC) announced by far its largest whistleblower award to date, agreeing to pay "more than $10 million" to a whistleblower who provided key information leading to a successful enforcement action. In accordance with Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank"), which established the CFTC's whistleblower program, the CFTC has not publicly disclosed information that could reasonably be expected to reveal the whistleblower's identity. In addition to not identifying the whistleblower, the CFTC has specified neither the exact amount of the award nor the successful enforcement action for which the whistleblower provided information.

For additional discussion and analysis, our blog post is available here.

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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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