Government Affairs Update

December 20, 2021

Editor’s Note: This will be the last edition of IRI’s Government Affairs Update for 2021. Publication will resume on January 10, 2022. IRI wishes you a healthy and safe holiday. 


IRI Submits Comments on DOL’s 2021 ESG/Proxy Voting Proposed Rule

On December 13, IRI submitted comments to the DOL in response to its 2021 proposed rule on ESG investment selection and proxy voting (Proposed Rule), formally known as “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.” Over 22,000 comments were submitted to the DOL on this proposed rule.

IRI comments were largely supportive of the Proposed Rule, noted our appreciation of the DOL’s outreach and engagement with stakeholders regarding their concerns with the 2020 final rule, known as “Financial Factors in Selecting Plan Investments,” or the (2020 Rules). Specifically, the Proposed Rule removes the prohibitions on incorporating environmental, social, and corporate governance (ESG) factors in fiduciaries’ investment selection. Further, the Proposed Rule effectively removed barriers to the use of ESG factors and investments in qualified default investment alternatives (QDIAs). IRI commended the DOL for placing ERISA-based fiduciary obligations for investment selection as paramount to any specific type of investment selection. This corresponds to IRI’s standing policy that while ESG investments should be permitted, they should be on level footing with non-ESG investments.

Therefore, IRI’s comments urged neutrality in the DOL’s 2021 Proposed Rule, noting instances in language used in the Proposed Rule where it appears to mandate or recommend consideration of ESG factors or ESG investments over non-ESG investments. IRI’s two primary comments were to (1) the importance of neutrality as to investment type, and (2) the need for a regulatory approach that provides long-term clarity and certainty for plan fiduciaries.

IRI’s comments also addressed specific areas where the DOL can improve or clarify the Proposed Rule.  For example, based on the lack of any real-world example where the circumstances would require it, IRI respectfully requested DOL to remove the tie-breaker provision in the Proposed Rule. Additionally, the Proposed Rule incorporated examples of ESG-related considerations a plan fiduciary can take into account when evaluating potential investments or investment courses of action. Inclusion of these examples creates a risk that plan fiduciaries will believe they are required to consider these factors in all circumstances or value ESG investments over other investment options.  Therefore, IRI recommended the DOL remove the list of examples of ESG-related considerations from the operative text of the Proposed Rule.

With respect to the Proxy Voting section of the Proposed Rule, IRI’s comments requested clarification on the use of mutual funds, and to revise how the use of Collective Investment Trusts (CITs) will be affected by the Proposed Rule’s proxy voting provisions.

IRI will continue to monitor any developments or revisions to the Proposed Rule and will share those developments with our Retirement Plans and Tax Committee once available.

Any questions should be referred to Emily Micale.



SEC Commissioner Roisman Announces Resignation

Today, the SEC formally announced  that Commissioner Elad Roisman has issued a statement of resignation from the Commission. Commissioner Roisman joined the five-member Commission as a Republican commissioner in September 2018, having served as chief counsel for Republicans on the Senate Banking Committee before that. Commissioner Roisman also briefly served as the SEC’s acting chairman at the end of the Trump administration.

Various news outlets and statements issued by Commissioner Roisman himself have indicated his disagreement with several of the policy and rulemaking priorities by the current SEC Chair Gensler and the Democratic-commissioner majority. In one of Roisman’s public criticisms of the SEC’s most recent semiannual policy agenda, he stated it is “brimming with plans to redo recently completed rules, add new regulatory obligations, and constrain investor choice.”

Commissioner Roisman has been most vocal on his opposition to the new Chair’s recent proposals to change to how the SEC treats money-market mutual fund rules, corporation stock buybacks, and derivatives. Further, he recently stated that current regulation of payment for order flow is effective, and the SEC’s treatment of free trading and meme stocks are a mischaracterization to investors by the new leadership.

Commissioner Roisman’s resignation will be effective as of the end of January 2022. While Commissioner Roisman has yet to announce his future plans, he is expected to remain an active and engaged voice in securities and investment markets.

Any questions should be referred to Emily Micale.

NAIC 2022 Officers Elected at Fall 2021 National Meeting

The following National Association of Insurance Commissioners (NAIC) 2022 Officers were elected by members during the Fall 2021 National Meeting in San Diego, CA:

  • President: Idaho Insurance Director Dean L. Cameron
  • President-Elect: Missouri Insurance Director Chlora Lindley-Myers
  • Vice President: Connecticut Insurance Commissioner Andrew Mais
  • Secretary-Treasurer: North Dakota Insurance Commissioner Jon Godfread

    IRI will seek opportunities to engage with these officers on key issues throughout 2022.

    Any questions should be referred to Sarah Wood.

    New Letter Committee Formed at NAIC

    NAIC members voted during the Fall 2021 National Meeting to form a new Innovation, Cybersecurity, and Technology (H) Committee to address the insurance implications of emerging technologies and cybersecurity. “The work of the H Committee will continue to elevate regulators’ focus on innovation and technology and ensure we stay on top of and advance the way the insurance regulatory framework functions to support innovation as an industry,” said David Altmaier, the 2021 NAIC President and Florida Insurance Commissioner. IRI commends the NAIC for providing a forum for these important issues and looks forward to engagement with the H Committee.

    Any questions should be referred to Sarah Wood.

    NAIC Releases Its First DE&I Report

    The NAIC released its first report on Diversity, Equity & Inclusion (DE&I) on December 14. The NAIC has developed a DE&I framework to drive change, promote accountability, and serve as a blueprint for implementing the NAIC’s overall goals and objectives.

    The report highlights activities that support the four key areas of the DE&I framework: 1) the workforce, 2) the workplace, 3) supporting NAIC members, and 4) volunteering and supporting communities. For example, some of the highlights over the last year include creating a DE&I Council, holding a DE&I Conference, recognizing employees who create an impact in DE&I, and launching a Special (EX) Committee on Race and Insurance.

    Any questions should be referred to Sarah Wood.

    SEC Staff Issues Statement on Form CRS Disclosures

    On Friday, December 17, the SEC staff issued a formal Statement on Form CRS Disclosures, a major component of the SEC’s Regulation Best Interest (Reg BI). The Statement was prepared by the SEC’s Standards of Conduct Implementation Committee and noted the Committee’s and FINRA’s initial observations regarding firms’ compliance with Form CRS were shared during an October 26, 2020 Roundtable.

    In this Statement, the Committee enumerates areas where Form CRS compliance improvements are needed, along with some explanatory observations. The Committee provides two primary comments at the top of the Statement, (1) specific disclosure topics required by Form CRS’s instructions, and (2) general requirements pertaining to context, format, and website postings. The Committee recommended that firms may wish to review their Form CRS based on the enumerated observations by the Committee, as identified below:

  • Use of Technical Language, Including Disclaimers
  • Omission of Required Information
  • Reliance on Proposed, Rather than Final Instructions
  • Lack of Specific References to More Detailed Information
  • Shortcomings in Descriptions of Relationships and Services; Fees, Costs, Conflicts, and Standard of Conduct (specific examples also listed within the Statement)
  • Modification and/or Supplementation of the Disciplinary History Disclosure
  • Issues with Prominently Displaying Relationship Summary on Firm Website
  • Issues with Description of Affiliate Relationships
  • Poor Design
  • Use of Marketing Language; and
  • Boilerplate explanations

    The Statement includes several links to guidance and resources for any firms seeking more information on these issues. IRI will share this Staff Statement with our Securities Committee to best address and mitigate the observations identified by the SEC.

    Any questions should be referred to Emily Micale.

    FINRA Proposes Amendments to FINRA Rule 3240, Based on Retrospective Rule Review Report

    On December 16, FINRA issued Regulatory Notice 21-43, Proposed Amendments to FINRA Rule 3240 (Borrowing from or Lending to Customers), based on its Retrospective Rule Review Report. The retrospective review was launched by FINRA in August 2019, seeking stakeholders’ comments on the effectiveness of Rule 3240. Based on FINRA’s Retrospective Rule Review Report, FINRA is now proposing the following amendments to Rule 3240:

  • Emphasize that the rule generally prohibits registered persons from entering into borrowing or lending arrangements with their customers
  • Clarify that the rule applies to borrowing or lending arrangements that pre-exist the broker-customer relationship
  • Extend the rule to prohibit entering into borrowing or lending arrangements within six months after the broker-customer relationship ends
  • Extend the rule to prohibit borrowing or lending arrangements with persons related to either the registered person or the customer, such as an arrangement between the registered person and the customer’s spouse or between the registered person’s outside business and the customer
  • Modernize the “immediate family” definition
  • Narrow the scope of the “personal relationship” exception
  • Provide factors for evaluating whether an arrangement is within the “personal relationship” or “business relationship” exceptions

Comments on the proposed amendments in this Regulatory Notice 21-43 are due by February 12, 2022. IRI will share the Proposed Amendments with our Securities Committee to decide whether IRI will submit responsive comments.

Any questions should be referred to Emily Micale.