December 13, 2022
Volume XII, Number 347
December 13, 2022
– DOL Issues Final Rule Amending Investment Duties Regulation –…by: James Frazier
– Third time lucky or Schrems III? The European Union Data Pact with…by: Diletta De Cicco and James Downes
– Renewed Era of Crypto Assets Growth in Hong Kong by: Jay Lee
– Division I Universities Must Be Ready for Changes to the NCAA…by: Paul V.
Kelly
– U.S.
Supreme Court Hears Oral Argument in Case Testing Limits of…
by: Michelle E.Phillips and Christopher M.
Repole
– Damages in Pre-Certification Discovery are Premature, Discovery…by: Jenniffer Cabrera
– When Chains Change, Do NFTs Stay The Same? How Hard Forks May Affect…by: Jason H.Finger
– COVID-19: A Roadmap to Fraud Investigations: Office of Inspector…
by: Stephen D.Bittinger
– DOJ Settlement with Electronic Health Records Provider Highlights…by: Ty E.Howard and Lane M.Webster
– Update: OFCCP Plans to Disclose EEO-1 Data for Non-Objecting…by: Abby M.
Warren
– Increasing US Enforcement Action for Sanctions Violations by Crypto…by: Hannah Laming and Adam Klauder
– DOJ Antitrust Division and HHS OIG Enter into Partnership to Increase…
by: Diane Hazel
– Can Discovery Be Compelled from a Party? Possession, Custody, Control…by: Kathryn C.Cole
– Weekly Bankruptcy Alert December 13, 2022 by: Bankruptcy & Creditors’ Rights
– All Things Chemical® Podcast: TSCA Regulation of Articles: The Saga…by: Lynn L.
Bergeson
– Energy & Sustainability M&A Activity — December 2022 by: Thomas R.Burton, III and Sahir Surmeli
– Energy & Sustainability IP Updates — December 2022 by: Brad M.Scheller
– SEC Reopens Proposal on Stock Buyback Rules by: Erin Reeves McGinnis
– Chips Chatter: December 5-12, 2022 by: Pablo E.Carrillo and Ludmilla L.
Kasulke
– How may behavioral advertising trackers do websites deploy currently? by: David A.Zetoony
– FRB Proposes Climate-Related Financial Risk Management Principles by: Daniel Meade
– Energy & Sustainability Litigation Updates — December 2022 by: Jacob H.Hupart
– Cross Border Recognition, 25 years on: the view from each side of the…by: Michelle N.
Saney
– A New Era of Technology in the Private Markets by: Louis Lehot and Christopher Converse
– New York City Postpones Enforcement of Automated Employment Decision…by: Simone R.D.Francis
– New Law Seeks To Curtail Coerced Debts by: Keith Paul Bishop
– Republican SEC Commissioners Continue to Criticize Proposed Climate…
by: Jacob H.Hupart
December 12, 2022
– Raters gonna rate…but there’s a bright side! by: Daniel B.Guggenheim
– SEC Awards More than $20 Million to Whistleblower by: Mary Jane Wilmoth
– Estate Planning for Football Season Ticket Holders by: Katherine M.Szymanski and Rebecca K.
Wrock
– American Hospital Association Urges DEA to Issue Special Registration…by: Nathaniel M.Lacktman
– EPA Announces $25.7 Million in Grants to Support Water Systems in…by: EPA
– Weekly IRS Roundup December 5 – December 9, 2022 by: Tax Practice Group McDermott Will Emery
– CMS Announces Strategy on Value-Based Payments for Specialty Care by: Anahita Anvari
– DOL Proposes Self-Correction Option and Other Changes to Voluntary…
by: Justin S Alex
– The City of Los Angeles’ Fair Work Week Ordinance Requires…
by: Tomi Oshita
– Recent Developments in Telehealth Enforcement by: Sara Helene Shanti and Danielle Vrabie
– ESG INVESTING AND PROXY VOTING: DOL’S NEW FINAL RULE by: Kristina M.Zanotti and Ruth E.Delaney
– IN A NEW YORK MINUTE, Telemarketing Laws Are Changing! by: Angelika Munger
– More Places, Less Spaces: California is Driving Down Development Costs by: Amanda S.Lee
– Bereavement Leave Becomes Mandatory in the Golden State by: Kaleb N.Berhe
– New Year Brings New Laws for Illinois Employers by: Mikela T.
Sutrina and Katherine H.Oblak
– Decision in U.S.v.Holland by: Gabriel L.Imperato
– Top Five Labor Law Developments for November 2022 by: Jonathan J.Spitz and Richard F.
Vitarelli
– “Cold-Pressed Juice” Lawsuit Permanently Dismissed by: Food and Drug Law at Keller and Heckman
– USPTO Releases New Guidelines Shortening the Response Deadline in…by: Luna M.Samman
– ‘No Exit’: SEC Sanctions Investment Adviser for Impeding…by: Peter D.Hutcheon
– TradeTalk China: December 2 – December 9, 2022 by: Pablo E.Carrillo and Ludmilla L.Kasulke
– $10.3 Million in Grants Awarded to Improve the Health of Long Island…
by: EPA
– RE-STRUC: Tax Changes as of 2023 by: Thomas van der Vliet and Louisa van Isselmuden
– The CAC Assessment Collection – Part 2: What Must Be Done Before…by: Amigo L.
Xie and Dan Wu
– Here We Go Again: Lesser Prairie-Chicken Re-Listed Under the…
by: Karma B.Brown and Linda Trees
– What’s more common: opt-in, opt-out, or notice cookie banners? by: David A.
Zetoony
– An Unstoppable Force Meets an Immovable Object: Microsoft to Fight…by: Jonathan Rubin
– Who Qualifies As An Expert Witness? by: Keith Paul Bishop
December 11, 2022
December 10, 2022
– Are Loans Securities? by: Leah Edelboim
– Fund Finance Credit Availability in 2023: Not Just Banks by: Cadwalader, Wickersham & Taft LLP
– Fund Finance Credit Availability Still Locked In by: Cadwalader, Wickersham & Taft LLP
– Shanghai Pudong Court Issues Preliminary Injunction in Chinese World…
by: Aaron Wininger
– Caution Advised for Language in Employment Settlement and Severance…by: Arthur Cunningham
DOL Issues Final Rule Amending Investment Duties Regulation – Provides New Guidance on Consideration of ESG Factors in Plan Investing
On November 22, the United States Department of Labor (“DOL”) released its final rule (the “Final Rule”) adopting certain revisions to its investment duties regulation under ERISA at 29 CFR Section 2550.404a-1 (the “Section 404a-1 Regulation”).
The revisions in the Final Rule are intended to clarify the application to ERISA plan fiduciaries of the ERISA duties of loyalty and prudence in respect of investments and the use of written proxy voting guidelines and policies.The Final Rule clarifies that ERISA plan fiduciaries may consider climate change and environmental, social and corporate governance (“ESG”) factors when making investment decisions and exercising shareholder rights for plans.
The Final Rule is the latest DOL action in the long-running back and forth in DOL guidance (depending on the political party of the administration in power) regarding the consideration of ESG factors in investment decisions.Briefly, the Final Rule modifies, and in some cases reverses, certain changes made in 2020 to the Section 404a-1 Regulation initiated under the Trump administration to address what the DOL noted at such time was a perceived heightened concern raised by ESG investing.
In 2021, the DOL conducted a review of the 2020 changes to the Section 404a-1 Regulation and issued an enforcement policy statement providing it would not enforce the 2020 rule.In October of 2021, the DOL issued a Notice of Proposed Rulemaking to amend the Section 404a-1 Regulation.The DOL indicated that the intent of the 2021 proposed amendments was to address its concerns that the 2020 changes, and the discussion in the release applicable to such changes, created uncertainty around the consideration of ESG factors in investment and proxy voting decisions.In this regard, among other things, the DOL noted stakeholder concerns that the 2020 changes “had a chilling effect on appropriate integration of climate change and other ESG factors in investment decisions.”
While the DOL made several changes in the Final Rule (as discussed below), the DOL stressed that the Final Rule does not change two important longstanding principles that: (1) the ERISA duties of prudence and loyalty obligate fiduciaries to focus on relevant risk-return factors and to not subordinate the interests of plan participants and beneficiaries to goals unrelated to the interests of participants and beneficiaries in their retirement income or other financial benefits under the plan; and (2) the fiduciary duty of managing plan assets that are shares of stock includes the management of rights appurtenant to such shares, including the right to vote proxies.
The following summarizes the most material (what the DOL characterizes in the preamble to the Final Rule as the “major”) amendments to the Section 404a-1 Regulation:
(1) Removal of “Pecuniary” and “Non-Pecuniary” Terminology.The Final Rule removes the “pecuniary” and “non-pecuniary” investment terminology added to the Section 404a-1 Regulation by the 2020 amendments, which required fiduciaries to evaluate investments and investment courses of action based solely on pecuniary factors, except in certain limited circumstances.
The Final Rule instead provides that a fiduciary’s determination with respect to an investment or investment course of action must be based on factors the fiduciary reasonably determines to be relevant to a risk/return analysis, and that these factors may include the economic effects of ESG factors on such investment or course of action.
(2) “Tie-breaker” Test Revisions.The Final Rule revises the so-called “tie-breaker” test in the Section 404a-1 Regulation, which provided that a fiduciary may consider collateral benefits in certain circumstances as tie-breakers when choosing between investment alternatives.The 2020 amendments permitted a fiduciary to base an investment decision on non-pecuniary factors if the fiduciary is unable to distinguish between or among investments on pecuniary factors alone, provided the fiduciary satisfies certain documentation requirements.The Final Rule replaces this with a requirement that the fiduciary prudently conclude that competing investments or courses of action equally serve the financial interests of the plan over the appropriate time horizon.
In such event, a fiduciary has flexibility to make a selection based on collateral benefits.The Final Rule also eliminates the specific documentation requirements applicable to the consideration of tie-breakers imposed by the 2020 amendments.
(3) Elimination of Stricter Rules for QDIAs.The Final Rule removes the restriction added to the Section 404a-1 Regulation in the 2020 amendments relating to “qualified default investment alternatives” (or “QDIAs”), which precluded plan fiduciaries from adding an investment option to a participant-directed defined contribution investment menu as a QDIA if such option’s objectives, goals or principal investment strategies include, consider or indicate the use of one or more non-pecuniary factors.Under the Final Rule, a fiduciary selecting a QDIA is no longer subject to such a restriction, and must merely satisfy the otherwise applicable standard of care in the selection of a QDIA.
(4) Clarification Regarding Consideration of Participant Preferences.
The Final Rule includes new language clarifying that fiduciaries do not violate the ERISA duty of loyalty solely by taking into account participant preferences when developing a menu of prudent investment alternatives for participant-directed defined contribution plans.
(5) Removal of Certain Provisions Relating to Proxy-Voting.Relating to proxy voting, the Final Rule removes language that the duty to manage shareholder rights appurtenant to shares of stock does not require voting of every proxy or the exercise of every shareholder right – the DOL expressed a concern that such language could be read to suggest that plan fiduciaries should be indifferent to the exercise of shareholder rights.The Final Rule also removes two “safe-harbor” examples relating to permissible voting policies that the DOL believes encourage abstention as the normal course.
In addition, the Final Rule eliminates certain specific monitoring obligations and specific recordkeeping requirements added by the 2020 amendments.
The general effective date of the Final Rule is January 30, 2023.The DOL is delaying the applicability of certain provisions relating to proxy voting until December 1, 2023..
