How Private Fund Advisers Should Assess the New DOL Rule

Many private fund advisers are wondering: How does the DOL Rule apply to my business? Why does it apply to my business?

The DOL Rule that went into effect on June 9, 2017 was intended to require those providing advice to certain investors to do so using a fiduciary standard of care. While arguably the biggest impact of the Rule falls on broker-dealers and investment advisers with retail clients, advisers to private funds may also be affected. The Rule has implications for private fund advisers that accept IRA and/or ERISA Plan investors, regardless of whether the private fund is considered to hold “plan assets.” While such advisers already must adhere to a fiduciary standard to their clients (here, private funds), the Rule regulates, among other things, when that private fund adviser may additionally become a fiduciary to the fund’s IRA and/or ERISA Plan investors.

To the extent the Rule may apply, the adviser may be limited in the way it can market investment products (i.e., interests in the private investment funds) to current and prospective IRA and ERISA Plan investors. The concern is that marketing communications, routine performance reporting, and other communications might cause the private fund adviser to become an ERISA fiduciary with respect to a decision by the IRA or ERISA Plan investor to invest in, continue holding, or redeem a private fund interest.

Want to read more?

Fill in the form below to download the full article.

Loading form...

Latest Content

Cayman Islands Data Protection Law Nears Taking Effect

Cybersecurity regulations have landed ashore on the islands, and life is about to become anything but a beach for firms forced to comply with the Cayman Islands’ new Data Protection Law (DPL), slated to take effect September 30, 2019. With provisions largely mirroring the EU’s General Data Protection Regulation (GDPR), entities with a presence or … Continued

SEC Risk Alert Puts Spotlight on Principal Trading, Agency Cross Trades

On September 4, 2019, the U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) issued another risk alert, this time on “Investment Adviser Principal and Agency Cross Trading Compliance Issues.” While not wildly informative, the Risk Alert summarizes several issues identified during examinations of the last three years and reminds us of … Continued

SEC Issues Guidance to Investment Advisers on Proxy Voting

At its August 21, 2019 Open Meeting, the Securities and Exchange Commission (“SEC”) voted 3-2 to issue guidance to assist registered investment advisers (“RIAs”) in carrying out their proxy voting responsibilities. While the guidance didn’t break a lot of new ground, it clarified the SEC’s expectations for investment advisers in voting client proxies and engaging … Continued