In connection with the Department of Labor’s (the “DOL”) new rules relating to fiduciary duties,[1] we have received a variety of inquiries from broker-dealers and other parties relating to the distribution of structured products. These rules will become effective in April 2017, in the absence of any further regulatory or Congressional action. Accordingly, many of these entities are seeking to adjust their MSDAs and similar sales or distribution agreements in order to clarify that they, or their counterparties, as applicable, are acting on a “riskless principal” or an “agency” basis, with a view to complying with the new BIC Exemption. (As readers of this publication know, the new BIC Exemption is not designed for use with purchases and resales made on a principal basis.)

For this purpose, we have prepared the form of MSDA addendum agreement set forth below. We have attempted to set forth this agreement in a format that will work well with a variety of MSDA forms that are currently in use. However, depending upon the agreement that is being amended, additional revisions may be needed.  

The form agreement below includes several italicized notes for clarification. In addition, the capitalized terms in the document should of course be reviewed for consistency against those in the existing agreement.

In connection with these updates, the parties may wish to review all of the provisions of the related agreement, to see if any improvements are needed or desirable or to ensure that the provisions are consistent with the business arrangements between the parties. As time passes, a variety of revisions based on evolving market practice, or changes in applicable laws and regulations over the past several years, may be worthy of consideration.

Click here to view the document.