March 1, 2021

IRI Government Affairs Update


SEC Chair Nomination Hearing Slated for March 2

The Senate Committee on Banking, Housing, and Urban Affairs will meet virtually on March 2 at 10:00 AM to conduct a hearing on President Biden’s nominees for the Securities and Exchange Commission Chair, Gary Gensler, and the Director of the Bureau of Consumer Financial Protection, Rohit Chopra. Gensler previously served as the Chairman of the Commodity Futures Trading Commission under President Obama and, more recently, as Chairman of the Maryland Financial Consumer Protection Commission. During his chairmanship, the Maryland Commission recommended the adoption of an expanded definition of fiduciary, which IRI successfully advocated against. As with previous nominees, IRI has sent a letter to the members of the Senate Banking Committee requesting the members consider asking Gensler about his views, thoughts, and plans to address the challenges many workers, investors, and retirees are facing as they seek to achieve a secure retirement. The questions IRI submitted focused on several topics, including preserving access to professional financial guidance, the permanent adoption of digital solutions, and reducing the regulatory barriers to simplify the offering of innovative lifetime income products.

IRI will be monitoring the hearing and will provide updates as needed following the hearing.

Any questions should be referred to Paul Richman or Jason Berkowitz.



House Financial Services Subcommittee Examines Social Responsibility

On February 25, the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets held a hearing entitled “Climate Change and Social Responsibility: Helping Corporate Boards and Investors Make Decisions for a Sustainable World.” The hearing was called to examine the “fundamental threat” climate change poses to “America’s financial eco-system, its businesses, and to the global economy” and how “environmental, social, and governance (ESG) criteria constitutes a measurable way to assess a company’s efforts to manage those risks and hold companies accountable.”

In his opening statement, Subcommittee Chairman Brad Sherman (D-CA) noted that society’s expectation of corporations has changed and “investors are interested in the social issues not just on earnings-per-share. They especially want information about the effect on climate change. Keep in mind that for the last 40 years, the number of weather events costing over $1 billion has increased by 300 percent. So climate change is real and it is affecting us. And we know who is affected most, it’s disadvantaged communities and communities of color.” Going further, Rep. Sherman expressed a “need to define and hopefully have numerical standards, measured, tabular, we want to change the behavior of corporations both in causing them to prepare for climate change and to hopefully minimize their effect on climate change.”

Representative Bill Huizenga (R-MI), the Subcommittee’s Ranking Member, expressed his concerns that while the demand for “ESG information has increased recently,” it is not the place of the government to mandate the disclosure of such data. “Politically motivated disclosure requirements,” opined Rep. Huizenga, “only increases cost and yet add another hurdle for companies who look to go public while discouraging other companies from doing so. […] In fact, the February 21 report from the global financial market center at Duke Law got so far as to say that securities law should be rewritten so that the SEC can regulate to fight quote “climate change, systematic racism, and income and wealth inequality” close quote.  This is not part of the tripartite mission of the SEC and instead of focusing on policies that solve societal ills, the SEC must remain focused on protecting investors, maintaining fair, orderly, and efficient markets, and to facilitate capital formation.”

Witnesses who testified before at the hearing were: Andy Green, Senior Fellow for Economic Policy, Center for American Progress; Heather McTeer Toney, Environmental Justice Liaison, Environmental Defense Fund and Senior Advisor, Moms Clear Air Force; Veena Ramani, Senior Program Director, Capital Market Systems, Ceres; James Andrus, Investment Manager, California Public Employees’ Retirement System; Vivek Ramaswamy, Founder & Executive Chairman at Roivant Sciences.

Any questions should be referred to John Jennings.

Sen. Menendez, Rep. Meeks Introduce Corporate Diversity Disclosure Legislation

Last week, Senator Bob Menendez (D-NJ) and Representative Gregory Meeks (D-NY) reintroduced the Improving Corporate Governance Through Diversity Act. The bill would require public companies to include in annual disclosures the gender, racial, ethnic, and veteran status of their board of directors, nominees, and senior executives bolstering the requirements of the Securities and Exchange Commission’s diversity disclosure rule. The bill also directs the Director of the SEC’s Office of Minority and Women Inclusion to generate a best practices and compliance report every three years. Additionally, the bill creates a “Diversity Advisory Group” at the SEC to study corporate diversity.

In a press statement, Senator Menendez said, “This bill will ensure transparency in corporate America, while highlighting the need for further accountability for public companies. It’s time corporate boardrooms mirror the rich diversity of our country.” Representative Meeks encouraged his Senate colleagues to advance the legislation, which the House passed in 116th Congress, and expressed that “diversity is proven to have a positive impact on business performance and we want to ensure an equitable and fair future for everyone. Disclosing the gender, racial, ethnic and veteran makeup of these corporate boardrooms will not only shed light on the value of diversity, but hopefully encourage corporate shareholders to increase diversity in the highest ranks of their corporations.”

Sens. Sherrod Brown (D-Ohio), Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), Cory Booker (D-N.J.), Dianne Feinstein (D-Calif.), Alex Padilla (D-Calif.), Kirsten Gillibrand (D-N.Y.), Catherine Cortez Masto (D-Nev.) and Raphael Warnock (D-Ga.) are cosponsoring the Senate bill.

Any questions should be referred to John Jennings.



State Standard of Conduct Legislation Update

The Montana Senate Business, Labor, and Economic Affairs Chair introduced and held a hearing on SB 363 amending the Montana Suitability in Annuity Transactions Act. The bill follows NAIC Model 275, and IRI supports its passage. If approved, the changes will be effective date October 1, 2021.

Idaho H.79 was heard and approved by the Senate Commerce & Human Resources Committee. IRI submitted a letter of support to the Committee. The bill follows NAIC Model 275 with additional sections clarifying and correcting the disclosure requirements of Chapter 290 of 2020. IRI will work with the Department of Insurance on the disclosure issues.

Any questions should be referred to Liz Pujolas.

DOL Extends COVID Relief for Plans, Participants, and Beneficiaries

Last year, the DOL, the Department of the Treasury, and the Internal Revenue Service (IRS) (collectively “Agencies”) issued a Joint Notice (2020 Notice) to provide relief for certain actions related to employee benefit plans required or permitted under Title I of ERISA and the Code. The relief under this 2020 Notice, aka EBSA Disaster Relief Notice 2020-01 EBSA Disaster Relief Notice 2020-01 (“Notice 2020-01”) was set to expire on February 28, but in response to industry and stakeholder inquiries, the DOL has now issued Notice 2021-01 to extend the availability of this relief.

Therefore, individuals and plans with timeframes that are subject to the relief under the 2020 Notice will have the applicable periods under the 2020 Notice disregarded until the earlier of: “(a) one year from the date they were first eligible for relief, or (b) sixty days after the announced end of the National Emergency (the end of the Outbreak Period). On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded under the [2020 Notice] will resume. In no case will a disregarded period exceed 1 year.”

This updated guidance under Notice 2021-1 has been coordinated with and reviewed by the Department of the Treasury, IRS, and HHS. The Department of the Treasury, IRS, and HHS have advised the Department of Labor that they concur with the guidance under Notice 2021-1 regarding the continuation of relief and the application of the laws under their jurisdiction.

Any questions should be referred to Emily Micale.

SEC Issues Directive on Review of Climate-Related Disclosures & Investor Bulletin on ESG

On February 24, Acting Securities and Exchange Commission (SEC) Chair Allison Herren Lee directed the SEC’s Division of Corporation Finance in a Public Statement to enhance its focus on climate-related disclosure in public company filings. In 2010, the SEC issued Guidance Regarding Disclosure Related to Climate Change addressed to public companies. Per Lee’s directive to enhance climate change disclosures, SEC staff will review how public companies’ disclosures address climate change per the 2010 guidance, assess compliance with disclosure obligations under the federal securities laws, communicate with public companies, and identify how the market is currently handling climate-related risks.

This directive is related to investors’ heightened consideration of climate-related issues when making their investment decisions, and may serve as a precursor to next steps by the SEC in “developing a more comprehensive framework that produces consistent, comparable, and reliable climate-related disclosures.”

Also, on February 26, the SEC issued an Investor Bulletin on Environmental, Social and Governance (ESG) Funds. This bulletin provides investors with basic information on what ESG funds are, how fund managers generally examine criteria within the ESG categories to analyze and select securities, basic rules and prohibitions in current securities laws and regulations, and listing common risks and benefits associated with ESG factors and investments.

Any questions should be referred to Emily Micale.

FINRA Adds Additional Licensing Exams Available Online

On February 24, in its COVID-19 FAQs, FINRA added to its list of licensing examinations available online. Based on the ongoing pandemic with its related operational challenges, following FINRA’s own Retrospective Rule Review, and on which IRI submitted comments on this matter, FINRA is adopting an interim accommodation request process to allow candidates to take additional FINRA exams online.

This extended list of online licensing exams now includes the Series 24, Series 57, Series 79, and Series 99 exams. This change is effective on February 24, 2021. An interim accommodation request is not required for the Securities Industry Essentials (SIE), Series 6 or Series 7 exams, which have been available online for all candidates since mid-July 2020.

FINRA will continue to assess the impact of COVID-19 to determine how long to offer this interim accommodation and will announce any future changes to this interim accommodation policy. IRI will update our membership as such updated information becomes available.

Any questions should be referred to Emily Micale.

FINRA Amends Rule 1010 to Permit Electronic Filing Requirements for Uniform Forms

Within its COVID-19 FAQs, and effective February 23, FINRA amended Rule 1010(c) to allow firms to rely on applicants’ electronic signatures to satisfy the rule’s signature requirements. Further, Rule 1010(c) continues to allow firms an option to rely on applicants’ manual (wet) signatures to satisfy the rule’s signature requirements. Finally, if a firm has already filed a Form U4 with FINRA on behalf of an applicant, the firm can obtain either a manual (wet) or an electronic signature from the applicant to satisfy Rule 1010(c)’s signature requirements. To clarify, if a firm previously obtained that applicant’s electronic signature consistent with amended Rule 1010(c), the firm does not need to obtain the applicant’s electronic signature again.

Any questions should be referred to Emily Micale.



March 2 Webinar “From Suitability to Best Interest: The Standard of Conduct Landscape in 2021

Join IRI’s Jason Berkowitz, Chief Legal & Regulatory Affairs Officer, and Emily Micale, Federal Regulatory Affairs Director, on March 2 at 3:00 PM Eastern as they provide an overview of the latest developments and a look ahead in this critically important issue space. The discussion will cover enhanced enforcement of Regulation Best Interest and Form CRS by the SEC and FINRA, the DOL’s evolving interpretation of the definition of fiduciary investment advice, the adoption of the NAIC’s model regulation on annuity sales practices, and efforts by the states to impose a fiduciary standard on broker-dealers and insurance producers.

To register, click here.

March 10 Webinar “Exploring PTE 84-24”

The U.S. Department of Labor’s recent re-interpretation of the five-part test used to assign investment advice fiduciary status, and related withdrawal of its 2005 Deseret Mutual Benefit Administrators advisory opinion guidance on rollover distribution advice, has sparked a renewed interest in exploring the contours of Prohibited Transaction Exemption (PTE) 84-24. During this 90 minute workshop on March 10 at 2:00 PM Eastern, attorneys from the Groom Law Group will walk through the DOL’s PTE 84-24 exemption and related conditions applicable to insurance and annuity sales, and will address a number of related questions, including: covered transactions, applicable conditions, how broad is the scope of exemptive relief for the receipt of compensation, what needs to be covered under the exemption’s written disclosure condition, and what are the areas of uncertainty and what insights can be gleaned from the administrative record?

To register, click here.