Employee Retirement Income Security Act of 1974: Difference between revisions

If there is more than a certain percentage of {{tag|ERISA}} plan money (or money from other non-{{tag|ERISA}} Government retirement plans with similar legislation) in a fund, it becomes itself subject to {{tag|ERISA}} regulations, particularly penal tax and investor protection provisions, ''and also provisions affecting the ordinary winding up of the fund and therefore netting''.

While some people will loosely talk of a "look-through" to the underlying fund it doesn’t seem right that you would look through the close out netting of a separate {{tag|Fund}} legal entity to view the insolvency scenario of an underlying {{tag|ERISA}} investor – particularly since the underlying investor will be no means necessarily itself be insolvent, just because a legally distinct fund it had invested in had blown up.  

It seems more likely that by dint of its {{tag|ERISA}} investment, the sleeve fund itself would be deemed subject to ERISA and therefore ERISA might intervene in the Fund's insolvency.

In any case in the UK the netting analysis depends on the good old fashioned corporate veil: Unless there is a reason (fraud etc.) to lift the veil and treat the proximate corporate entity (the Fund) as a sham, the corporate veil will not be lifted under English law: the fact that there is just one investor in the company is very clearly no reason to lift the veil in itself (else the majority of all corporate veils would be lifted). (I would have said exactly the same would apply in the US – but as per above happy to stand corrected)

The credit/trading risk analysis would also be directed at the assets in the fund. There will be no recourse beyond them and I can't see how the characterisation of the person contributing those assets in return for a structurally subordinated equity stake could make any difference, either in the UK or in the US.