Bill Mandia talks to Fund Action about the states’ arguments for a Fifth Circuit re-hearing on the Fiduciary rule.
Undeterred by the Fifth Circuit’s rejection of their request to intervene in U.S. Chamber Commerce v. U.S. Dep’t of Labor, the States of California, New York, and Oregon moved for reconsideration in the Fifth Circuit today. The States request that the three-judge panel who heard the appeal reconsider their denial of the States’ petition to intervene or, at a minimum, refer the question of intervention to the entire Fifth Circuit for a rehearing en banc. The States previously requested a rehearing en banc, which the court rejected as improper because the States are technically not parties to the appeal. The States’ motion notes that the business groups that filed the action against the DOL will oppose their request and that the Department of Justice, on behalf of the DOL, takes no position on it.
It remains to be seen how the panel addresses the request, but for the reasons discussed in our prior blog post, the States face an uphill battle. It is unlikely that the panel will reconsider its prior ruling and allow the States to intervene because the States have not presented any new lines of evidence or argument that were unavailable to them when they made their original request to intervene. While a 2-1 decision on a significant issue always raises the possibility of a rehearing en banc, the relative weakness of the States’ arguments regarding intervention may lead the panel to conclude, even in a 2-1 vote, that the issue is not worth the entire Fifth Circuit’s time.
As highlighted by Ignites, Morningstar recently released a report on the growth of assets in passive funds pursuing a sustainable strategy. Interestingly, about half of the funds are thematic. Unsurprisingly, virtually all are equity funds. The US market for these types of funds continues to lag other regions, though that gap is not unique to ESG passive funds, and applies to ESG broadly.
As I wrote in Profit & Loss last year, FX service providers, particularly those in an agency capacity, should continue to monitor the fate of the DOL Fiduciary Rule, particularly for straddling the line between pure sales/marketing and those communications that may give rise to a “recommendation” under the 2016 rule. Hedging managers will stand to benefit if we revert to the 1975 rule.
Expert attorneys warn the new non-enforcement policy binds only the DOL and IRS; state regulators and private plaintiffs could potentially seek to bring an action for alleged non-compliance with impartial conduct standards.
I am here on Amelia Island, FL about to start our panel on fiduciary law developments: the SEC release (and what it means practically-speaking, the delta between adviser and broker-dealer duties, the issues around the new disclosures, etc.), the latest on the DOL Fiduciary Rule (FAB 2018-02, the Fifth Circuit decision, how firms should proceed with compliance), what is in store from state legislatures and regulators, and the recent DOL ESG guidance and how managers should view the guidance. There are over 200 attendees here and, based on questions I received last night, there is a real need for clarity on fiduciary governance at the federal and state levels!
Three members of Stradley Ronon’s new Fiduciary Governance Group will present at the Investment Company Institute’s 2018 General Membership Meeting on May 22 in Washington, DC. David W. Grim, Lawrence P. Stadulis and George Michael Gerstein will comprise the panel, “The SEC the DOL and the States: A New Fiduciary World,” where they will discuss rapidly developing fiduciary law developments at the federal and state levels.
Grim, most recently Director of the U.S. Securities and Exchange Commission’s Division of Investment Management, provides counsel on all aspects of investment management law. He assists clients with a unique perspective developed during his over 20 years of public service at the SEC, including his time as one of only a small number of people who has served as the top regulator of the asset management industry. Grim joined the Division of Investment Management in 1995 directly from law school and rose to become its leader. He developed regulatory policy and legal guidance for investment advisers and investment companies, including mutual funds, exchange-traded funds, closed-end funds, variable insurance products, unit investment trusts and business development companies.
Stadulis co-chairs the fiduciary governance group and advises clients in matters pertaining to the registration and regulation of investment advisers and investment companies under federal and state securities laws. He also manages related issues pertaining to investment advisers and investment companies, including matters involving ERISA, broker-dealer regulation and banking laws.
Gerstein co-chairs the fiduciary governance group and advises clients on the fiduciary and prohibited transaction provisions of ERISA. He counsels banks, trust companies, broker-dealers, investment managers, private fund (including hedge funds and private equity funds) sponsors, and advisers on their responsibilities under federal law when managing plan assets. George routinely advises clients on the DOL Fiduciary Rule and other fiduciary developments at the federal and state levels, and additionally, he counsels clients on fiduciary-like duties and restrictions under other laws, including federal and state banking requirements, and the rules and regulations of governmental plans.