grandfathering

grandfathering

An alteration of the rules that apply to a certain investment or investment technique while stipulating that investment actions taken before a certain date remain subject to the old rules. For example, Congress may change the law by stipulating that certain types of municipal bonds no longer pay tax-free interest while at the same time grandfathering the municipal bonds issued before the date on which the new law is to take effect.

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grandfathering

In regulation, permission to continue an old practice even though it does not conform to new standards, provided it was practiced prior to the effective date of the new standards. For example, if Congress were to pass a law subjecting the automotive industry to certain carbon emissions standards, cars manufactured prior to the effective date of the legislation would likely be grandfathered and not be subject to the regulation.