DOL Issues Proposed Regulation on Proxy Voting and Shareholder Rights

The Department of Labor’s Employee Benefits Security Administration has released a pre-publication version of a proposed regulation intended to govern shareholder rights and proxy voting by fiduciaries of ERISA-governed retirement plans. Securities held as investments in retirement plans may have certain shareholder voting rights, and fiduciaries to such plans may, within certain parameters, exercise those voting rights on behalf of—by “proxy”—for the participants within whose accounts these securities are held.

It is EBSA’s intention that this proposed regulation clarify a fiduciary’s duties of prudence and exclusive purpose with respect to a plan’s participants and the investments they hold, in matters of proxy voting and exercising of other shareholder rights. These proposed regulations will amend an existing investment duties regulation that has been in place since 1979. Other sub-regulatory guidance on this subject has also been issued during the intervening period.

In a news release accompanying this proposed regulation, the agency states that there have been misunderstandings and confusion surrounding proxy voting and shareholder rights issues, and that the proposed regulation has the overall goal of “ensuring plan fiduciaries execute their ERISA duties in an appropriate and cost-efficient manner when exercising shareholder rights.” A fact sheet has also been released.

Public comments will be accepted for a 30-day period following publication in the Federal Register.