Sunday, December 20, 2020

Compliance with the DOL's New Proxy Rules May Stump ERISA Fiduciaries

A counter-revolution in ESG Investing?

Author: David Schwartz

On Friday, December 11, the Department of Labor (DOL) issued its final rules on proxy voting by ERISA fiduciaries. As proposed last August 30, the draft rules drew hundreds of responses by the ESG-directed investing community, many of which criticized as unworkable the DOL proposal. The final version of the rules eliminates the need for plan sponsors to weigh the economic vs. non-economic effects before casting their proxy votes. Yet that softer, principles-based approach may itself create compliance problems for ERISA fiduciaries -- and may not even survive the first hundred days of the Biden administration.

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Tuesday, December 22, 2015

Lawmakers Fail to Stop the DOL’s New Fiduciary Standard from Moving Forward

Author: David Schwartz

Foes of the DOL’s proposed fiduciary rule suffered a setback last week when the House of Representatives passed an omnibus spending bill omitting any measures that would have stalled, hindered, or killed the proposal.  On the table during budget negotiations were riders and amendments to the bill that would have defunded the proposal, required a new comment period, or proposed an alternative standard altogether.  The new standard’s proponents, including the DOL, SEC, and the Obama administration say that the rule proposal which would require brokers to put their clients' interests ahead of their own in 401(k) and individual retirement accounts is vital to protecting workers saving for retirement from high-fee products that erode their savings.

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Friday, May 22, 2015

Supreme Court Rules ERISA Fiduciaries have Continuing Duty to Monitor

Author: David Schwartz

In a unanimous opinion issued on May 18, 2015, the Supreme Court confirmed a continuing duty of ERISA trustees to monitor investments. Although the case involved a complicated procedural history before arriving at the Supreme Court, the lawsuit presented a fairly simple question: is it sufficient for the ERISA duty of prudence that the fiduciary make prudent decisions to invest in the first instance, or must the fiduciary also make prudent ongoing decisions about whether it should change the composition of the plan’s portfolio or otherwise sell assets?  

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Tuesday, May 12, 2015

The Origins of Trusts and Fiduciary Duties

Foundations of Capital Markets

Author: David Schwartz

A trust is a fiduciary arrangement that allows one party to transfer assets to a third party, or trustee, to hold assets on behalf of a single beneficiary or a number of beneficiaries. Trusts have myriad uses and are employed across a wide variety of property transfers, transactions, testamentary bequests, and business arrangements. They are so useful because they are so very flexible and can be custom tailored to restrict exactly how the assets are to be managed during the life of the trust, as well as how, when, and in what form the assets pass to the beneficiaries. Because trusts have such utility and so widely used, a large body of law has grown up around them. And since a key aspect of trusts is the placement of things of value in the care of a third party, the trustee, a corollary concept, fiduciary duty, has also grown to address the rights and responsibilities of trustees with respect to the property in their care, and with respect to the trust’s beneficiaries. Because of their importance to modern commerce and life events in general, over the course of three short posts, we will examine the history of trusts and the development of fiduciary duties, application of trust and fiduciary principles to investment funds, and we will explore some of the powers and duties of fund trustees. In this first post, we examine the historical development of trusts and the fiduciary concept.

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