Legislative News

Labor Appropriations Bill Contains ESG Policy Rider

The House of Representatives has included the Fiscal Year 2024 Labor, Health and Human Services, and Education appropriations bill on the schedule for a possible vote this week. The bill would reduce funding for the Department of Labor by 5.7 percent under the President’s budget request. A policy provision in the bill would block any of the funds from being used to “administer, implement, or enforce” the Department of Labor’s Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights regulation. The rule treats environmental, social, and governance (ESG) factors no differently than non-ESG factors so long as investment options are selected in compliance with ERISA fundamental principles of prudence and loyalty.

The Insured Retirement Institute (IRI) understands that additional policy riders addressing the DOL proposed “Retirement Security Rule: Definition of an Investment Advice Fiduciary” and the PTE amendments that accompanied the proposed rule will be presented to the House Rules Committee for consideration as amendments when the bill goes to the floor for consideration. IRI will monitor the House of Representatives for any action on the Fiscal Year 2024 Department of Labor appropriations bill.
Ways and Means Examines ESG in Retirement Savings

On November 7, the House Ways and Means Committee held a hearing entitled “Ensuring that ‘Woke’ Doesn’t Leave Americans Broke: Protecting Seniors and Savers from ESG Activism.” In his opening statement, Committee Chairman Jason Smith (R-MO) said, “This Committee has a duty to ensure that our tax rules support Americans’ financial security. We have a responsibility to put the needs of seniors ahead of climate extremists and far-left activists who want to use retirement savings to finance a political agenda.” The Committee’s Ranking Member, Rep. Richard Neal (D-MA) rebutted Republican efforts on ESG investing, saying, “Could you imagine a lifetime of hard work when you’re being told by some that you cannot choose how to invest your retirement savings? The public isn’t interested in being told what to do by the government. Politicizing retirement policy jeopardizes workers’ hard-earned savings, and that’s the last thing the American people need.”

Providing testimony to the Committee were:

  • The Honorable Preston Rutledge, Principal and Founder, Rutledge Policy Group, LLC
  • The Honorable Jason Isaac, Director, Life:Powered
  • The Honorable Marlo Oaks, State Treasurer, Utah
  • Mr. Mason Bolay, Senior Vice President, First Bank & Trust Company
  • Mr. Brandon Rees, Deputy Director, AFL-CIO Office of Investment

IRI continues to monitor Congress for actions relating to ESG investment in retirement savings.

House Majority Leader Announces 2024 Legislative Calendar

Majority Leader Steve Scalise (R-LA) announced the 2024 House of Representatives calendar. The 2024 schedule can be found here.

Regulatory News

Washington State Finalizes its Best Interest Regulatory Updates

Washington finalized their rulemaking last week, which incorporated the NAIC best interest model updates within their training provisions. The other updates were incorporated into statute earlier this year. Both the statute and the final rulemaking have an effective date of January 1, 2024.

Mississippi Insurance Commissioner Reelected

Incumbent Mississippi Insurance Commissioner Mike Chaney was reelected in the state’s election last week. He received 60.2% of the votes and defeated Democrat Bruce Burton. This will be Chaney’s fifth term as insurance commissioner.

Compliance News

State Standard of Conduct Resources

IRI recently updated the State Standard of Conduct resources page, which now includes an interactive map that tracks the adoption of the NAIC Best Interest Model Regulation. The map will be continuously updated to reflect new proposals and final rules as they become available. In addition to the new map, the page has been updated to include state securities activity related to NASAA’s “best interest” proposal, including reports they have produced analyzing the implementation of Reg BI, and relevant information related to the Massachusetts fiduciary rule and court rulings. These resources are only available to IRI members and accessing them will require members to login to the IRI member portal.

FINRA Reg BI Enforcement Action

FINRA recently released information related to another Reg BI complaint investigation where the Chief Executive Officer, Chief Compliance Officer, and majority owner of the organization allegedly failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures reasonably designed to achieve compliance with the Care Obligation under Reg BI and FINRA Rule 2111. The individual also failed to supervise and review alerts related to customer accounts, which resulted in excessive high-cost trading and churning not consistent with the customers’ investment profiles, and failed to appear for on-the-record testimony requested by FINRA as part of the investigation.