New @Ignites article examines the shortcomings of ESG disclosures to asset managers and investors and why many are pushing for standardization. Disclosures are voluntary and self-selecting, hindering ESG integration. @SASB @FSB_TCFD @CalvertUpdates https://t.co/9DyMEK6ipo
— Fiduciary Governance Group (@FidGovGroup) November 8, 2019
Good example of where governmental plans can present unique issues relative to ERISA plans. Prohibitions against select jurisdictions found in various statutes/regs applicable to governmental plans. There could be ultra vires transaction if fiduciary unaware. @pensionsnews https://t.co/0YF3aXFrIP
— Fiduciary Governance Group (@FidGovGroup) November 6, 2019
Yesterday's proposed SEC changes to investment adviser advertising rules will likely be welcomed by industry. More flexible, principles-based approach, and modernized. Testimonials and endorsements OK under certain circumstances. More from us tomorrow.
— Fiduciary Governance Group (@FidGovGroup) November 5, 2019
Many sponsors of private funds, particularly hedge funds, rely on the 25% or significant participant test in order to avoid holding plan assets under ERISA. Equity participation in an entity by benefit plan investors is “significant” on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25 percent or more of the value of any class of equity interests in the entity is held by benefit plan investors. Investments by the fund’s investment manager and its affiliates are disregarded. There is little guidance in terms of what constitutes separate equity classes. Some ERISA attorneys will look to see how “class” is defined under the securities laws, such as the Exchange Ac or the ’40 Act. Yet others consider other factors, as well. Is it described in the offering materials as a class? Would the different features (e.g., different fees, liquidity terms, etc.) render it a different class under local law?
The Financial Times is reporting that the SEC expects to propose new rules related to proxy voting next month. The proposals will likely raise the threshold for shareholder proposal resubmissions, as well as to “propose rules that would require proxy adviser firms to give companies two chances to review proxy voting materials before they are sent to shareholders….” If adopted, these rules could have significant implications for proxy adviser firms, as well as for proxy voting used to address ESG risk factors.
One of the most versatile and popular ERISA exemptions used by discretionary investment managers is the QPAM Exemption. Embedded in the exemption are financial requirements (i.e., capital and assets under management requirements) applicable to the investment manager based on the manager’s prior fiscal year.
The DOL explained that the minimum capital and assets under management requirement are designed to ensure that the investment manager (i.e., the QPAM) is large enough to ward off undue influence over its decision-making by parties in interest. This can prove very challenging for brand new managers because the exemption requires the manager have a prior fiscal year under its belt. There can be work-arounds for new managers, but they should be carefully considered before sending out an investment manager agreement that includes a representation that the investment manager is a QPAM.