DOL Guidance Puts Proxy Advisors Under ERISA Fiduciary Duties

Overview

• New Labor Department guidance this month says many proxy advisory firms now count as investment advice fiduciaries under ERISA.
• A firm falls in scope when it controls how a retirement plan votes proxies or sells ongoing, tailored voting advice for a fee.
• The agency said these common arrangements will “ordinarily” meet its five-part fiduciary test even after the return to the 1975 standard.
• Fiduciary status requires putting plan participants’ interests first and using care and skill in proxy recommendations and voting.
• The guidance also allows state disclosure laws to apply and has ISS, Glass Lewis, plan sponsors, and asset managers reviewing contracts, voting authority, and possible shared liability.