"This Technical Release addresses two issues. First, to the extent proxy advisory firms either: [1] exercise authority or control over shareholder rights attributable to shares that are ERISA plan assets, including the voting of proxies; or [2] provide advice for a fee to ERISA plans about how such plans should exercise proxy voting rights attributable to shares of stock they own, this Technical Release clarifies that such proxy advisory firms must meet ERISA's functional fiduciary requirements.

"Second, and relatedly, where a state law mandates disclosure to investors by proxy advisory firms only when they make recommendations other than for the purpose of maximizing risk-adjusted return for the advisee, such laws are generally not preempted by ERISA. ERISA fiduciary provisions do not alter this result. ERISA's fiduciary duties require that actions be taken with respect to a plan investor only for the purpose of maximizing risk-adjusted financial return. For that reason, no plan governed by ERISA should ever receive a disclosure under such a state disclosure law, and, accordingly, no relationship between that law and any ERISA plan would be created. Consequently, such a state law neither has an impermissible connection with, nor makes a prohibited reference to, ERISA plans, and it generally would not be preempted by ERISA."  MORE >>

"[Executive Order 14366] makes clear that EBSA should not just examine whether proxy advisors' actions meet the test to make them investment advice fiduciaries but also asked the department to look at other actors who manage, or advise those that manage, the rights connected to shares of stock, such as the right to vote for board members, held by ERISA-covered plans. Proxy advisors have played a central role in politicizing the capital markets by pursuing ESG investing and DEI positions, but they aren't alone. At the President's directive, EBSA's Technical Release looks beyond the proxy advisors to consider when the actions of others, such as large asset managers, sovereign wealth funds, and the overseers of the proxy plumbing, render them investment advice fiduciaries."  MORE >>