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DOL Proposes Rule to Severely Restrict ESG Considerations in Selecting ERISA Plan Investments

On June 23, 2020, the U.S. Department of Labor (DOL) proposed amendments to the investment duties regulations under ERISA that would make it clear that retirement plan fiduciaries must not consider non-financial factors in making investment decisions for ERISA-covered retirement plans (including 401(k) plans). This guidance is of particular importance in light of recent trends involving the flows into so-called environmental, social and governance (ESG) funds and the integration of ESG factors into investment decisions by retirement plans. If finalized as proposed, the rule would both expand on the DOL’s long-standing position that decisions concerning the selection and monitoring of investments must focus solely on economic considerations and further add to the current administration’s series of pronouncements that has generally discouraged allocating assets to ESG funds and ESG integration by ERISA plans.

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SEC Clarifies Definition of Municipal Advisor for Registered Investment Advisers


Time to Read: 1 minutes Practices: Private Funds, Hedge Funds, Investment Management

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As noted in our prior alert dated January 8, 2014, the final rule recently adopted by the SEC to establish a permanent registration regime for municipal advisors (the “Final Rule”) raised a number of interpretive issues for investment advisers. Today, the SEC clarified that SEC-registered investment advisers that provide advice on municipal derivatives in an investment portfolio for clients that are municipal entities are not, merely as a result of providing such advice, “municipal advisors” for purposes of the Final Rule.[1] A copy of the FAQ is available here (see Section 4 of the FAQ for clarification of the scope of the registered investment adviser exclusion).

The guidance did not provide any additional information with respect to application of the Final Rule to unregistered investment advisers (e.g., exempt reporting advisers).

Please refer to our prior alert for additional information on municipal advisor registration, including the process of registering as a municipal advisor and implications of being a municipal advisor. Please contact your usual Ropes & Gray advisor with any questions.


[1] Other relationships with municipal entities may still require municipal advisor registration, such as providing advice to a municipal entity regarding municipal derivatives that are entered into by the municipal entity in connection with the issuance of municipal securities (e.g., swaps to hedge interest rate risk in connection with the issuance of municipal debt securities). 

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