4/15/2026
DOL Guidance Calls Proxy Advisers ‘Functional Fiduciaries’
planadviser (04/15/26) Van Bramer, James
The U.S. Department of Labor (DOL) issued new guidance warning that proxy advisory firms may be subject to federal fiduciary standards under the Employee Retirement Income Security Act, escalating a broader campaign by policymakers to curb the influence of proxy advisory firms. The guidance, released on Wednesday, in the form of a technical release from the department’s Employee Benefits Security Administration, clarifies that proxy advisers “regularly fit the definition of functional fiduciaries” under ERISA if they exercise control over shareholder votes or provide investment advice for a fee to retirement plans. At the same time, the agency signaled support for certain state-level regulations of the industry, saying laws that require disclosures when advice is not based on financial considerations would “generally not be preempted” by ERISA. The move adds ERISA to the intensifying scrutiny from President Donald Trump’s administration over the role of proxy advisory firms, which advise institutional investors on how to vote on corporate matters including corporate governance, executive pay and environmental policies. The EBSA guidance marks the latest step in a coordinated effort by the Trump administration and certain state lawmakers to rein in the firms, which they say wield outsized influence over corporate governance while promoting nonfinancial agendas. The technical release underscores that DOL officials consider proxy voting a fiduciary act under ERISA that must be carried out “for the exclusive purpose of maximizing risk-adjusted return.” It also cautions that advisory firms could face liability if their recommendations deviate from those standards. In addition, the release states that the guidance “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.” The DOL guidance follows the December 2025 executive order that mentioned proxy advisers Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC and sought to curb what Trump deemed as their “outsized influence” that allegedly “prioritize radical political agendas” ahead of financial returns for U.S. investors and retirees. The executive order instructed the DOL to revise “all regulations and guidance regarding the fiduciary status of individuals who manage, or, like proxy advisors, advise those who manage, the rights appurtenant to shares held by plans covered under [ERISA].” His order explicitly tied the issue to the financial interests of workers and retirees. In addition, states have begun to test the boundaries of their authority over the industry. In Indiana, lawmakers recently enacted House Bill 1273, a measure requiring proxy advisers to disclose whether recommendations the advisers make against company management are based on a “written financial analysis.” If such analysis is absent, firms must explicitly state that fact to clients and, in some cases, to the companies themselves, and even display notices on their websites. Supporters of the Indiana law say it is designed to ensure that investment advice is grounded in financial considerations rather than environmental, social or governance factors. But the measure has already drawn legal challenges. Institutional Shareholder Services said this week that it had filed suit in federal court seeking to block the Indiana law before it takes effect in July. The company argued that the statute imposes unconstitutional “viewpoint discrimination” by targeting recommendations that diverge from company management and could force misleading disclosures about ISS’ research process. The firm also contended that the Indiana law improperly extends beyond Indiana’s borders by applying to recommendations made anywhere in the world. ISS declined to comment further on the law or on the EBSA guidance. Glass Lewis, another large proxy advisory firm, which recently detailed its concerns over 13 states’ efforts against proxy firms, also did not respond to a request for comment on the state efforts or on the guidance. The EBSA guidance comes less than a month after a federal judge in Texas vacated a Biden-era fiduciary rule that had extended an ERISA fiduciary standard to professionals providing one-time retirement investment advice, including recommendations on rollovers, annuity purchases and plan menu design. In 2024, the DOL’s Retirement Security Rule was challenged in court by advocacy groups for independent insurance advisers and others, alleging the rule broadened the definition of what constitutes fiduciary advice around retirement investments. When Trump took office in January 2025, the rule’s fate was essentially solidified. Trump’s DOL quickly moved to stop defending it.
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