Comment Letter to the Department of Labor in Response to the Departments Proposed Rule to Amend the Definition of Fiduciary Under ERISA

February 03, 2011

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Topics: Employee Benefits Security Administration Department of Labor, DOL, ERISA, alternative investment vehicles, hedge funds, diversification, risk management, equity markets, fixed income markets, Joseph Dear, California Public Employees' Retirement System, Senate Banking Subcommittee on Securities, Insurance and Investment, pension fund, rate of return, fee structure, performance fee, total returns, hedge fund managers, risk-adjusted returns, high water marks, government safety new, pooled investment funds, Congress, Securities and Exchange Commission, SEC, Commodity Futures and Exchange Commission, CFTC, non-plan asset funds, plan asset vehicles, general partner, DOL regulations, equity securities, plan assets, market concern, Investor Protection, private investment fund, principal underwriter, fiduciary, appraisals, pricing services, custodians, appraisers, managing member, Internal Revenue Code, pooled investment vehicles, fiduciary liability insurance. prime brokerage, daily mark, swap counterparty, fund administration agreements, asset-based fee compensation, prohibited transaction provisions, net asset value, hard-to-value, private equity holdings, real estate holdings, side-pocket investments, appraisal of property, investment advisers, valuation firm, hedge fund manager, private pension, good faith estimate, may be considered standard, significantly influence standard, ERISA fiduciaries, mutual understanding, valuation of assets, "may be considered" advice, risk appetites, tailored advice, pooled investment fund, exemption applications, transaction reversal, excise taxes, selling exception, due diligence, adverse, marketing services, impartial investment advice, purchaser, seller, bilateral agreement, default, derivative markets, short sales, options, structured products, futures, settlement accommodations, overdraft coverage, inadvertent fiduciary status, pooled vehicle, market color, prime brokers, general partners,
From: MFA, Richard Baker


The Office of Regulations and Interpretations: Employee Benefits Security Administration. U.S. Department of Labor

MFA submitted a comment letter to the Department of Labor in response to the Departments proposed rule to amend the definition of fiduciary under ERISA. In our letter, we encouraged the Department: (1) to confirm that the proposed rule would not impose fiduciary obligations on general partners, advisers and service providers to private funds with less than 25% ownership by ERISA plans, consistent with Congresss intent in the Pension Protection Act of 2006; (2) reconsider changes to the definition that would (a) delete the language that the agreement, arrangement or understanding between a service provider and a plan be mutual; (b) change the test that advice be a primary basis for a plans investment decision to requiring only that advice may be considered by the plan; and (c) remove a requirement that advice be individualized or tailored to a plan, as these proposed changes could have significant unintended consequences by making market participants fiduciaries without them knowing or intending to become a fiduciary; and (3) clarify the extent to which service providers to pooled investment funds will be deemed fiduciaries under the proposed rule and adopt appropriate exceptions to the prohibited transaction rules to ensure that funds can continue to enter into normal financial transactions on commercially reasonable terms. In our letter, we also requested an opportunity to testify at the Departments March 1 hearing on the proposed rule.