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
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
