DOL Releases Spring 2021 Regulatory Agenda

On Friday, the DOL released its Spring 2021 Regulatory Agenda, outlining the specific regulatory projects it intends to pursue during the second half of 2021. This is the DOL’s first regulatory agenda under the new Administration and under the leadership of new DOL Secretary Marty Walsh. Several of IRI’s key advocacy efforts and ongoing work streams are included on the regulatory agenda, including the following:

  1. Definition of Fiduciary:  This proposed rulemaking would amend the regulatory definition of the term “fiduciary” set forth in ERISA “to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code.”  The proposed amendment would consider practices of investment advisers, and the expectations of plan representatives and participants, IRA owners receiving investment advice, as well as developments in the investment marketplace, including compensation of advisers and related conflicts of interest.  In conjunction with this rulemaking, EBSA also will assess related prohibited transaction class exemptions, while considering proposing amendments or new exemptions to in relation to regulation of employee benefit plan and IRA investors.
  2. ESG Rule & Proxy Voting Rule: Per President Biden’s Executive Order, Climate-Related Financial Risk, the DOL is directed to issue a proposed rule for notice and comment by September 2021. This proposed rule will either suspend, revise, or rescind the so-called ESG-Rule, formally known as “Financial Factors in Selecting Plan Investments”, and the “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights.” EBSA has been directed to undertake a review of these regulations under Title I of ERISA in accordance with Biden’s Executive Orders.
  3. Pension Benefit Statements-Lifetime Income Illustrations: Section 105 of ERISA requires retirement plans routinely provide its participants and certain beneficiaries with individual pension benefit statements. The timing of provision of such statements depends on the type of plan. Generally, defined benefit plans must provide the statement every three years, with an annual alternative. Whereas Individual account plans permitting participant direction must provide the statement quarterly, individual account plans that do not permit participant direction of investments must provide the statement annually. Section 203 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) amended section 105 of ERISA to add a lifetime income illustration to pension benefit statements furnished to participants in certain defined contribution plans.

This final rulemaking follows an interim final rule from 2020, on which IRI submitted comments. Whether IRI’s comments, along with other industry-submitted comments, are reflected in the final rule will become evident once the DOL publishes this final rule.

As these forthcoming proposals and final rules are formally issued, IRI will ensure prompt distribution to our membership so that IRI can respond in a timely and effective manner.

Any questions should be referred to Emily Micale or Jason Berkowitz.

SEC Announces Annual Regulatory Agenda

On Friday, the SEC announced its Annual Regulatory Agenda for 2021 under the leadership of new Chair Gary Gensler. Along with the regulatory agenda, the SEC issued a related press release outlining its top priorities for the year.

As with the DOL’s Spring 2021 regulatory agenda, the SEC’s annual regulatory agenda covers several IRI regulatory policy priorities and ongoing workstreams. Specifically, proposals related to Climate Change Disclosure and “Rules Related to Investment Companies and Investment Advisers to Address Matters Relating to Environmental, Social and Governance Factors” are on the agenda.

The agenda also notes that the SEC is aiming to finalize its pending proposal on “Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors, and Improved Fee and Risk Disclosure for Mutual Funds and ETFs; Fee Information in Investment Company Ads.” IRI, along with our fellow trades submitted comments when this proposal was issued in 2020.

Other proposed regulations on the agenda that may be of importance to IRI’s membership include: Mandated Electronic Filings, Cybersecurity Risk Governance, Amendments to the Custody Rules for Investment Advisers, Electronic Submission of Applications for Orders Under the Advisers Act, Confidential Treatment Requests for Filings on Form 13F, and ADV-NR, Incentive-Based Compensation Arrangements, and Electronic Filing of Broker-Dealer Reports. More information about each of these items are available via the link to the SEC’s 2021 Annual Regulatory Agenda link above.

The list of proposed and final-stage rules on the SEC’s 2021 annual regulatory agenda is extensive and comprehensive. We encourage members to review the agenda and inform IRI staff if any projects listed on the agenda are of particular importance to them and/or the industry as a whole. IRI will work with our Securities Committee and, if appropriate, our Advocacy Steering Committee, to evaluate whether and how IRI should engage on any matters identified by members as potentially important.

In addition, Commissioners Peirce and Roisman issued a joint public statement  on the SEC Chair’s announcement of the 2021 regulatory agenda.

Any questions should be referred to Emily Micale.


ESG Disclosure Bill Expected Before the House Later this Week

The ESG Disclosure Simplification Act (H.R. 1187) is expected to be voted on by the House of Representatives this week. The bill, introduced by Representative Juan Vargas (D-CA), would require public companies to disclose “a clear description about the link between environmental, social, and governance (ESG) metrics and long-term business strategy” and a “description of any process” they use “to determine the impact of ESG on long-term” strategy in annual filings with the Securities and Exchange Commission (SEC). The bill would also create a “Sustainable Finance Advisory Committee” which is tasked with “identifying the challenges and opportunities for investors associated with sustainable finance” and to make recommendations to Congress on “policy changes to facilitate the flow of capital towards sustainable investments, in particular environmentally sustainable investments.” The bill has been amended to also include provisions disclosure of corporate political spending, corporate pay, climate risk, and human capital reporting.

IRI will monitor the House for action on the bill and provide any updates as necessary.

Any questions should be referred to John Jennings.

Walsh Appears Before House Ed & Labor

On June 9, Department of Labor (DOL) Secretary Marty Walsh testified for nearly 5 hours before the House Committee on Education and Labor regarding the policies and priorities the Department will be pursuing. In his opening statement, Sec. Walsh outlined the Administration’s desire to modernize the workforce system and the budget needed to connect “workers and job seekers, particularly those from disadvantaged communities, to high-quality, good-paying jobs.” Committee Chairman Bobby Scott (D-VA), also focused his opening comments on job growth, saying, “We look forward to your testimony on how the American Jobs Plan and American Families Plan would make smart investments to build back a better economy to enable workers to get back to work.” Representative Virginia Foxx (R-NC), the Committee’s Ranking Member, expressed her concerns with the Biden-Harris Administration’s proposals related to unions participation and a minimum wage increase.

Secretary Walsh did not mention any policies or priorities related to retirement security during his testimony and he was not asked any questions from the Committee about retirement security. He did, however, announce two key regulatory initiatives on COVID-19 workplace safety and revisions to the previous Administration’s overtime rule.

IRI will continue to monitor Congress and the DOL for proposals related to retirement security.

Any questions should be referred to John Jennings or Emily Micale.

Senate HELP Committee to Consider DOL Nominees

On June 16, the Senate Committee of Health, Education, Labor, and Pensions (HELP) is schedule to vote on the nominations for several Biden-Harris nominees to key posts, including Rajesh Nayak for Assistant Secretary of Labor for Policy. Nayak previously served as a DOL political aide throughout most of the Obama Administration, including as Deputy Assistant Secretary for Policy, the senior counsel to the Solicitor, and as Deputy Chief of Staff to then-Secretary Tom Perez. Nayak is known as an advocate for progressive regulatory policy. Last year, he co-authored a paper in which he proposed overhauling the White House rulemaking review process to enhance regulatory capacity and give greater weight to inequality and worker interests when scrutinizing the need for agency rules. Nayak appeared before the HELP Committee on May 27 for a confirmation hearing.

At the DOL, the Assistant Secretary for Policy oversees the office responsible for supporting all the Department’s subagencies in the drafting of regulation and helps in coordination with the White House. The Office is the DOL’s primary liaison with the Office of Information and Regulatory Affairs at the White House’s Office of Management and Budget (OMB). 

Any questions should be referred to John Jennings.


NAIC Best Interest Model – State Developments

Texas Governor Greg Abbott signed legislation that closely aligns with the NAIC best interest model regulation, and Alabama followed suit late last week following a favorable outcome in a regulatory hearing on their proposal on June 9. In advance of the hearing, IRI submitted written comments supporting the re-revised proposal and encouraging the Department to make a number of additional changes to ensure consistency with the Model. During the hearing, the Department considered and agreed to make all IRI’s requested changes. With these latest developments, thirteen states have now adopted the 2020 version of the Model. Proposals remain under consideration in five other states and are expected to be issued by 6-8 other states in the coming months.

IRI’s state tracker has been updated to reflect these developments.

Any questions should be referred to Jason Berkowitz.

SEC Names Director of Division of Corporation Finance and SEC’s General Counsel

Today, the SEC announced that Renee Jones has been appointed Director of the Division of Corporation Finance. John Coates, the Division’s current Acting Director, has been named SEC General Counsel. Both appointments are effective June 21, 2021.

While the Directors of the Divisions of Investment Management and Trading and Markets have yet to be named, IRI will continue to monitor any such announcements and share them with IRI members as such news becomes available.

Any questions should be referred to Emily Micale.