The Dodd-Frank Act established a comprehensive new regime of central clearing and trade execution requirements for certain over the counter swap transactions. In anticipation of the effectiveness of that new regime, the Securities Industry and Financial Markets Association (SIFMA) requested an advisory opinion from the U.S. Department of Labor (DOL) on the applicability of the Employee Retirement Income Security Act of 1974 (ERISA) to certain elements of the central clearing of swaps entered into by pension plans and other entities deemed to hold “plan assets,” including hedge funds deemed to be “plan asset funds” (ERISA plans). SIFMA was concerned that margin held by clearing members might be considered “plan assets” and that clearing members might be deemed ERISA fiduciaries or “parties in interest” to an ERISA plan subject to ERISA’s prohibited transaction rules. In response, the DOL recently issued an advisory opinion (Opinion) addressing these issues. The Opinion impacts plan asset hedge funds, which are subject to ERISA’s substantive provisions. See “How Can Hedge Fund Managers Accept ERISA Money Above the 25 Percent Threshold While Avoiding ERISA’s More Onerous Prohibited Transaction Provisions? (Part Three of Three)
,” Hedge Fund Law Report, Vol. 3, No. 24 (Jun. 18, 2010). This article summarizes the Opinion and its implications for ERISA plans, including plan asset hedge funds.