DOL Confirms Proxy Advisors May Be Investment Advice Fiduciaries

The Department of Labor announced that it has issued Technical Release 2026-01, guidance reaffirming that proxy advisors that regularly engage in exercising control over shareholder rights attributable to ERISA plan assets, or provide advice for a fee about how ERISA plans should exercise proxy voting rights, must meet ERISA’s functional fiduciary requirements. The guidance follows an executive order, Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors issued in December by President Trump spotlighting two large foreign-owned proxy advisors.

Additionally, the guidance notes that proxy voting is increasingly the subject of state legislation that may interact with ERISA’s preemption provision. For example, 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. Further, 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.