Stroock Special Bulletin
"To the DOL’s Credit: Guidance for Plans on Dodd-Frank and MBS and ABS Transactions"
Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") requires federal agencies to review existing regulations that reference, or require an assessment of, the credit-worthiness of a security or money market instrument, and to modify such regulations to remove any reference to or requirement regarding credit ratings. The Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the analogous provisions of the Internal Revenue Code of 1986, as amended, impose fiduciary responsibility and prohibited transaction rules with respect to the assets of plans subject to those rules.
The Department of Labor ("DOL") has granted a series of individual exemptions that provide relief from certain of these prohibited transaction rules for specified securitization deals, such as those for the purchase of eligible mortgage- and asset-backed securities. These exemptions are commonly referred to collectively as the "Underwriters' Exemption." For the past year, some uncertainty existed as to whether prohibited transaction exemptions issued under ERISA by the DOL, including the Underwriters' Exemption, were among the "regulations" to be revised under Dodd Frank.
This Stroock Special Bulletin briefly examines guidance on this issue that the DOL issued on July 1, 2011.