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Corporate Governance

: The Harvard Law School Corporate Governance Blog

Proposed Regulations Would Expand ERISA Fiduciary Exposure

By Harvard Law School Program on Corporate Governance

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Editor?s Note: James Morphy is a partner at Sullivan & Cromwell LLP specializing in mergers & acquisitions and corporate governance. This post is based on a Sullivan & Cromwell client memorandum.

On October 21, 2010, the Department of Labor (?DOL?) proposed regulations (the ?Proposed Regulations?) that would, if adopted, significantly expand the circumstances in which a person will be treated as a fiduciary under the Employee Retirement Income Security Act of 1974 (?ERISA?) by reason of providing investment advice for a fee to an employee benefit plan. A fiduciary under ERISA is subject to strict prudence and conflict of interest standards and it is the DOL?s expressed intention in making the changes to enhance its ?ability to redress service provider abuses that currently exist in the market, such as undisclosed fees, misrepresentations of compensation arrangements, and biased appraisals of the value of employer securities and other plan investments.? Because many financial institutions have regular interactions with employee benefit plans and their fiduciaries?as counterparties, service providers, agents, and so forth?the Proposed Regulations are widely relevant for the financial services industry.

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Full post as published by The Harvard Law School Corporate Governance Blog on November 09, 2010 (boomark / email).