IRI Government Affairs Update

February 22, 2021


DOL’s New PTE for Investment Advice Professionals Takes Effect

As anticipated, the Department of Labor officially allowed the new prohibited transaction exemption for providers of fiduciary investment advice (PTE 2020-02) to take effect as scheduled last Tuesday, February 16, 2021. The Department also issued a press release on the newly effective PTE on February 12.

The Department did not alter the scheduled expiration date (December 20, 2021) for the temporary non-enforcement policy under which the industry has been operating since the Fifth Circuit vacated the 2016 fiduciary rule. However, we remain hopeful that the additional guidance referenced in the release will include an extension of that policy until at least February 16, 2022, as the industry has requested. However, at this time, we have no indication as to the timing or the extent of such future guidance to be provided by DOL.

IRI also issued a press release to commend the DOL for allowing the exemption to move forward while also emphasizing our continued concerns about the DOL’s discussion of the five-part test for fiduciary status in the preamble to the final PTE.

Looking ahead, IRI will be working with our Standard of Conduct Task Force to provide implementation support for firms planning to rely on the new exemption and/or PTE 84-24 as an alternative source of exemptive relief. The Task Force held an extended call last week, and our members resolved it would be beneficial for IRI to develop a new Working Group for related implementation issues and advocacy support. The Task Force will guide our continued engagement with the DOL and the other trades on the five-part test and a clear and workable path to exemptive relief for independent insurance agents.

IRI will continue to provide updates on guidance and engagement as they become available. Any questions should be referred to Jason Berkowitz or Emily Micale.



Labor Secretary Nomination Advances Out of Committee

On February 11, the Senate Committee on Health, Education, Labor, and Pensions (HELP) voted 18-4 to advance President Biden’s nomination of Marty Walsh to be Secretary of Labor. The committee’s vote sets up Walsh — the two-term Democratic mayor of Boston — for a final up-or-down confirmation vote by the full Senate.  The timing for the full Senate vote remains unclear. Prior to the vote, the committee released the nominee’s responses to written questions for the record. Questions posed related to the nominee’s views about his plans for potential DOL action on the fiduciary rule, ESG rule, and retirement security.  IRI has prepared a summary of his responses to pertinent questions related to retirement security issues.  Several of the questions for the record addressed topics that IRI had suggested members of the committee raise in a letter sent prior to the hearing held last week. 

Any questions should be referred to Paul Richman.

DOL Staffing-Up Political Roles

The Biden Administration is moving forward with political appointments of staff to the Department of Labor. On February 10, the White House announced the nomination of Julie Su to serve as Deputy Secretary of Labor. Su currently serves as the Secretary of California Labor and Workforce Development Agency. Prior to her appointment as Secretary, Su was California’s Labor Commissioner and was a civil rights attorney for 17 years. The White House’s announcement of Su highlighted her achievements, stating “Su is a nationally recognized expert on workers’ rights and civil rights who has dedicated her distinguished legal career to advancing justice on behalf of poor and disenfranchised communities, and is a past recipient of a MacArthur Foundation ‘Genius’ grant.”

The Administration also announced last week the hiring of several other political appointees to positions not requiring Senate confirmations. Nikki McKinney is now the DOL’s Associate Deputy Secretary, and Joseph Shantz will be Counselor to the Deputy Secretary. Both McKenney and Shantz worked for Senator Patty Murray (D-WA) on the Senate HELP Committee. Kristin Garcia was hired as the Chief of Staff of the DOL’s Wage and Hour Division. Garcia was most recently special counsel to the Commissioner of Labor in California. Tanya Goldman, a former DOL staffer during the Obama administration, is also returning as the Principal Deputy Assistant Secretary of Policy.

Walsh has also named several members of his personal staff at the DOL. Dan Koh has been named as Walsh’s Chief of Staff. Koh previously served as Walsh’s Chief of Staff in the Mayor’s Office and ran for Congress against Representative Lori Trahan in 2018. Fernando Ortiz, Walsh’s liaison with the Boston City Council, will also be joining Walsh in Washington.

In addition, President Biden recently announced that he has selected Pronita Gupta to be a senior White House adviser on labor policy. Gupta will serve as special assistant to the president for labor and workers at the White House Domestic Policy Council. In this role, she will help shape President Biden’s workplace agenda by working with the Labor Department, National Labor Relations Board, and the U.S. Equal Employment Opportunity Commission to coordinate policy, regulations, and personnel decisions. She comes to the White House from the Center for Law and Social Policy, where she was director of job quality and she was also the deputy director of DOL’s Women’s Bureau during the Obama administration.

IRI will continue to monitor for the announcement of political appointees joining the Biden Administration and the Labor Department.

Any questions should be referred to John Jennings.

Financial Services Lead Republicans Request SEC Action on Several Initiatives

Last week, Congressman Patrick McHenry (R-NC), the House Financial Services Committee Ranking Member and Senator Pat Toomey (R-PA), Senate Banking Committee Ranking Member, submitted a letter to the Securities and Exchange Commission (SEC) Acting Chair Allison Lee calling the SEC to start or complete work on seven initiatives. In the letter, McHenry and Toomey highlighted the Biden administration’s “commitment to unity” and highlighted these seven “good government initiatives” which they believe the “SEC should immediately undertake to advance its mission and the interests of investors.” The seven initiatives are:

  • Report on faster settlement of equity securities. This section requests that the SEC make reporting cycles shorter than they currently are. 
  • Modernize transfer agent regulation. This asks for the SEC to change rules they have before a crisis puts outdated rules to the test.
  • Research analyst rules. The legislators would like to see new uniform rules to prevent conflicts of interest between investment banking and securities research services at brokerage firms.
  • Remote working modernization. They ask the SEC to take steps to recognize the shift to remote work and eliminate the outdated in-person board meetings and “wet” signatures on paper.
  • Proxy plumbing. Here, they ask for the SEC to move forward with efforts to ensure integrity in the proxy voting process.
  • Rules mandating obsolete technology or favoring specific private entities. The SEC should review and modify its rules so that they do not entrench specific types of technologies, formats, or proprietary products.
  • Cybersecurity data. Their final request is for the SEC to take measures to improve cybersecurity against data breaches and unauthorized access.

IRI will continue to provide updates as the SEC responds.

Any questions should be referred to John Jennings.



NAIC Announces 2021 Regulatory Priorities

The National Association of Insurance Commissioners (NAIC) announced their strategic priorities for 2021, and several items align with IRI’s state action agenda. IRI looks forward to working with the NAIC and across the states on these matters.

  • COVID-19 remains an action item for regulators to ensure important consumer protections while providing access to industry products and services. 
  • Race & Insurance — The special committee created mid-2020 continues to work across health, life and property insurance systems to ensure the availability and affordability of insurance products for persons of color and historically underrepresented groups and promote diversity and inclusion across state regulatory departments and the NAIC.
  • Consumer Data Privacy — The NAIC will continue to review, monitor, and update current state insurance privacy protections to ensure that consumer data privacy is protected. IRI will work with the NAIC to ensure alignment with the Graham Leach Bliley Act and the elimination of private rights of action.
  • Big Data/Artificial Intelligence —The recently adopted NAIC AI Principles for the insurance industry will be the foundation for regulatory practices that monitor and oversee the industry’s compliance while still promoting pro-consumer innovation.

Any questions should be referred to Liz Pujolas.

DOL Assessing Possible Next Steps on ESG Rule

Consistent with an executive order issued by President Biden last month, the Department of Labor is undertaking a review of the so-called ESG rule, which was adopted near the end of the Trump Administration. The rule became effective on January 12, and IRI and several of our sister trade organizations have encouraged the DOL to consider a period of delayed enforcement, as compliance with the final rule represents a time-consuming and complex process to adjust current operations and practices. In addition, we suggested that they consider issuing a request for information (RFI) to solicit public input to assist in their analysis of the final rule.

Based on input from members of our Retirement Plans and Tax Committee, IRI’s primary concerns relate to (i) the additional and seemingly conflicting restrictions this rule puts on plan sponsors’ ability to meet their obligations under ERISA to prudently select investment options that suit the best interest of their employees, (ii) the bar on utilizing ESG-influenced investments as ‘qualified default investment alternatives’ (QDIAs), and (iii) the threat of private litigation.

IRI will continue to monitor any developments, collaborate with fellow trades and report back to the membership on significant developments.

Any questions should be referred to Emily Micale.

Texas Introduces Standard of Conduct Legislation

The Texas House Insurance Committee Chair introduced HB1777, updating the best interest standards. IRI reviewed a draft of the legislation in late 2020 and recommended language changes not fully incorporated in HB1777. IRI will work with the TX legislature to clarify the timing of training and expectations for new and existing agents.

Any questions should be referred to Liz Pujolas.

FINRA’s COVID-19 Relief Retrospective Rule Review

Last week, IRI submitted a comment letter on FINRA’s COVID-19 Retrospective Rule Review, which offered stakeholders the opportunity to comment on FINRA’s temporary, pandemic-related regulatory relief measures. FINRA issued Notice 20-42, providing a comprehensive list of all its COVID-related regulatory relief. It allows for business and professional operations to continue during the pandemic and the transition to alternative working arrangements.

While IRI focused specific attention on the continuation and possible permanency of remote inspections and supervision, expansion of examinations available online, we also identified some operational considerations such as e-signatures and requested an opportunity to continue to identify and discuss other regulatory relief measures as alternative working conditions continue and necessitate.

IRI also used the opportunity in our written comments to express an interest in continuing an ongoing dialogue with FINRA on regulatory modernization efforts to best serve our mutual members and consumers alike in the current and post-pandemic financial and retirement marketplace.

Any questions should be referred to Emily Micale.