“'All Clear' for ERISA Swaps? Clearvoyance on Competing Rules Not Required"

On February 8, 2013, the Department of Labor ("DOL") released Advisory Opinion 2013-01A (the "Advisory Opinion"), highly anticipated guidance on cleared swaps.  The Advisory Opinion was issued in response to concerns among employee benefit plans subject to the fiduciary responsibility and prohibited transaction provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), as well as plan sponsors, broker-dealers, investment managers, and other financial market participants regarding the application of ERISA to certain "cleared swap" transactions conducted pursuant to provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act").  

This Stroock Special Bulletin provides an overview of the Advisory Opinion, in which the DOL concludes that:

  • a Clearing Member generally would not be a fiduciary in the cleared swaps context;
  • exemptive relief may be applicable to the exercise of "subsidiary" rights to the underlying primary swap transaction, such as close out and other contractual remedies – where there is sufficient information about such "subsidiary" transactions in the relevant agreement; and
  • margin posted in the cleared swaps context should not generally be viewed as "plan assets."