Nappa Dodd Frank 02 20111

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Latest fiduciary developments for governmental plans

Text of Nappa Dodd Frank 02 20111

  • 1. NAPPA Fiduciary and Plan Governance Section New Fiduciaries: Dodd-Frank and DOL Expand the List of UsualSuspectsWhat Does it Mean for Your Fund? Richard K. Matta February 2, 2011
  • 2. Fiduciary Responsibilities in Flux
    • Dodd-Frank Legislation
      • Myriad changes applicable to all financial entities
      • SEC report to Congress January 17 greater supervision of investment advisers
      • SEC report to Congress January 20 new fiduciary rules for broker-dealers
    • Other legislative developments
      • Social investing
      • Regulation of public plans
    • DOL proposed new fiduciary definition most sweeping change in 35 years
    • DOL service-provider disclosure rules
    • DOL rules for participant disclosures (DC plans)
    • SEC Pay to Play rules
  • 3. Dodd-Frank Overview Formal Citation
    • Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203) enacted on July 21, 2010
  • 4. Dodd-Frank Overview Important Links
    • Certified text of the Act is available at:
      • http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173enr.txt.pdf or:
      • http://tinyurl.com/26zalzn
    • SEC Spotlight page:
      • http://www.sec.gov/spotlight/dodd-frank.shtml
    • CFTC Dodd-Frank page:
      • http:// www.cftc.gov/LawRegulation/DoddFrankAct/index.htm
  • 5. Dodd-Frank Overview Individual Titles
    • Title I Financial Stability Act of 2010
    • Title II [Orderly Liquidation Authority]
    • Title III Enhancing Financial Institution Safety and Soundness Act of 2010
    • Title IV - Private Fund Investment Advisers Registration Act of 2010
    • Title V
      • Federal Insurance Office Act of 2010
      • Nonadmitted and Reinsurance Reform Act of 2010
  • 6. Dodd-Frank Overview Individual Titles
    • Title VI - Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010
    • Title VII - Wall Street Transparency and Accountability Act
    • Title VIII - Payment, Clearing, and Settlement Supervision Act of 2010
    • Title IX - Investor Protection and Securities Reform Act of 2010
    • Title X - Consumer Financial Protection Act of 2010
  • 7. Dodd-Frank Overview Individual Titles
    • Title XI [Federal Reserve Provisions]
    • Title XII - Improving Access to Mainstream Financial Institutions Act of 2010
    • Title XIII - Pay It Back Act
    • Title XIV - Mortgage Reform and Anti-Predatory Lending Act
    • Title XV [Miscellaneous Provisions]
    • Title XVI [Section 1256 Contracts]
  • 8. Dodd-Frank Many Questions Fewer Answers
    • What plans should know:
      • Most advisers to hedge funds and private equity funds will have to register with the SEC
      • Advisers already registered will have to collect and report more information
      • New limits on bank investment and related activities
      • New rules for will apply to interest rate swaps and other derivatives
      • Small victory: stable value contracts will not be regulated as swaps (at least not yet)
      • Lots of new regulations will be coming
      • SEC Reports to Congress
  • 9. "Private Fund Investment Advisers Registration Act of 2010" (Dodd-Frank Title IV)
    • Repeals the "private fund" exemption from registration under the Investment Advisers Act for 15 or fewer clients
    • Most advisers to private funds (hedge, PE, real estate) must to register with the SEC or state regulators
      • Very limited exception for foreign advisers to US clients (venture capital exception to the exception)
    • Not relevant to bank collective trusts or insurance company pooled separate accounts
  • 10. "Private Fund Investment Advisers Registration Act of 2010" (Dodd-Frank Title IV)
    • New reporting requirements re:
      • assets under management
      • use of leverage
      • counterparty credit-risk exposure
      • trading and investment positions and practices
      • valuation policies and practices
      • types of assets held
      • side letters
      • any other information the SEC deems necessary
    • Essentially all records subject to SEC examination
    • Advisers with custody of client assets must have independent custody audit
    • Proposed rules January 26, 2011
  • 11. New section 13 of the Bank Holding Company Act, i.e ., the "Volcker Rule" (Dodd-Frank Title VI)
    • Banking Entities prohibited from engaging in proprietary trading (as counterparties) including transactions in stocks, bonds, options, commodities, derivatives or other financial instruments
    • Exceptions for customer-related trading and market making activities
    • Exception for insurance company general account investments
  • 12. New section 13 of the Bank Holding Company Act, i.e ., the "Volcker Rule" (Dodd-Frank Title VI)
    • Banking Entities also prohibited from "sponsoring" or investing in a hedge fund or private equity fund (defined as any entity or fund exempt from registration under section 3(c)(1) or 3(c)(7) of the Investment Company Act or any similar fund)
    • Final version excludes from the definition of sponsoring bona fide fiduciary activities performed on behalf of customers
    • Limited-purpose trust companies also excepted
  • 13. "Wall Street Transparency and Accountability Act" ( Dodd-Frank Title VII)
    • Imposes new regulatory framework on the derivatives market and substantial new regulation on transactions designated as "swaps" and on certain swap market participants
      • With limited exceptions, swaps will need to be standardized and settled through a registered clearinghouse
      • Swaps not settled through a clearinghouse will still be subject to reporting requirements
      • Some small investors prohibited from participating
      • Persons acting as "swap dealers" and "major swap participants" will be required to register with the CFTC and/or the SEC
      • Swap dealers and major swap participants subject to substantial new requirements regarding capital, margin deposits, disclosure (transparency), and conflicts
      • Future industry bailouts prohibited
  • 14. "Wall Street Transparency and Accountability Act" ( Dodd-Frank Title VII)
    • What swaps are covered?
      • Broad range of OTC "derivative" instruments commonly referred to as swaps, puts, caps, and collars relating to commodities, currencies, securities, securities indices and other financial instruments, "synthetic" contracts and financial or economic interests of any kind based on future performance or notional amounts
      • Does not apply to exchange-traded instruments
  • 15. "Wall Street Transparency and Accountability Act" ( Dodd-Frank Title VII)
    • Stable value contracts:
      • Temporarily exempted from regulation as swaps
      • Stable value contracts existing as of the date of enactment grandfathered
      • SEC and CFTC, in consultation with the Department of Labor, the Treasury Department and state insurance regulators, must determine within 15 months of enactment whether stable value contracts fall within the definition of a "swap.
      • If stable value contracts are determined to be swaps, the regulators must make a further determination of whether they should be exempted
  • 16. "Wall Street Transparency and Accountabil