The prohibited transaction provisions of ERISA limit arrangements and payments to service providers to ERISA-covered retirement plans, including investment advisers, which may involve conflicts of interest with respect to the use of plan assets. An exemption from the prohibited transaction limitation is available, however, for the use of ERISA plan assets to pay reasonable compensation for services. In order to provide plan sponsors with the ability to effectively determine what constitutes reasonable compensation, the Department of Labor (“DOL”) issued proposed regulations in December, 2007 that require service providers to provide specific disclosures to plan sponsors. After an interim final release in July 2010, final regulations were issued on February 2, 2012 establishing July 1, 2012 as the deadline for initial, required disclosures by plan service providers.

FINRA announced this week it is requesting comment on proposed express procedures that would permit registered representatives who are the “subject of” allegations of sales practice violations made in arbitration claims (but are not named as actual parties to the arbitration) to seek expungement. So-called “subject of” allegations are reported to FINRA’s Central Registration Depository (“CRD”) system on Forms U4 and U5 in the same way that customer complaints are reported.

In January 2010, the SEC established a formal program to encourage and reward individuals who cooperate with the agency in its enforcement investigations and litigation. On March 19, the SEC’s Enforcement Director, Robert Khuzami, issued a public statement touting the importance of the initiative and its successful use in two related enforcement actions settled in 2011. Khuzami credited the cooperation of a “senior executive” with facilitating the recovery of $217 million to victims and additional penalties of $27.5 million against AXA Rosenberg and Barr M. Rosenberg related to non-disclosed errors in the firm’s quantitative investment process. Relatedly, SEC Chairman Mary Shapiro recently praised the Commission’s whistleblower program for “producing higher quality leads and shortening the length of investigations.”