Sutherland Alert: DOL Advisory Opinions Consider Fiduciary Issues

Sutherland Alert: DOL Advisory Opinions Consider Fiduciary Issues

by Mark Smith, Dan Buchner, and Jamey Medlin

The U.S. Department of Labor (DOL) recently issued three advisory opinions considering fiduciary or prohibited transaction issues arising in the management of ERISA plans.

Asset Manager's Selection of Remotely Affiliated Broker-Dealer

In Advisory Opinion 2011-06A (February 4, 2011), an asset manager (AAM) as a matter of policy would not execute trades for ERISA-covered plans through a remotely affiliated broker-dealer (Mitsubishi Group Brokers) even if that broker-dealer offered best execution or a unique investment opportunity. AAM was concerned that if it selected a Mitsubishi Group Broker while acting as an ERISA fiduciary, it might commit a non-exempt prohibited transaction - either a violation of the per se rules of §406(a) or the conflict of interest rule of §406(b)(2) - because the parent company of Mitsubishi Group Brokers:

  • Owned 19.9% of AAM's corporate parent, and
  • Appointed one of the 11 directors to the board of AAM's corporate parent. That director did not have veto or other special authority, and that board did not make any decisions with respect to AAM's trading partners, policies or procedures. The parent of Mitsubishi Group Brokers did not appoint any directors of AAM's board.

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