PLANSPONSOR - January - February 2024 - 8

RULES & REGULATIONS
" Since the Department of
Labor guidance regarding
cryptocurrency, in my experience,
clients have not shown an interest
in including crypto assets ... "
Recognizing that
the reason many
collect early is simply because they need
the money, the authors endorsed passage
of the Retirement Savings for Americans
Act, which was introduced this past
October and proposes creating a federal
automatic individual retirement account
program that could have a governmental
match as high as 5%.
New DOL Proxy Voting Rules
Are in Effect
The Department of Labor completed
its final rule on prudence and loyalty in
selecting plan investments and exercising
shareholder rights, sometimes called the
ESG [environmental, social and governance]
rule, in November 2022. The
elements of the rule pertaining to shareholder
rights and proxy voting took effect
this past December.
The DOL at the same time removed
language from old rules that it said incentivized
abstentions on shareholder proposals.
That excision removed a safe harbor voting
policy that limited " voting resources to
types of proposals that the fiduciary has
prudently determined are substantially
related to the issuer's business activities
or are expected to have a material effect on
the value of the investment. "
In the context of pooled investment
vehicles, where some plans may
be subject to proxy voting policies that
conflict with the policies of other plans
in the pool, the manager would be
required, to the extent possible, to reconcile
conflicting policies and vote proxies
proportionately in accordance with each
plan's interest in the vehicle. However,
consistent with longstanding guidance,
8 PLANSPONSOR.COM January - February 2024
a manager may instead require investors
to accept the manager's own proxy voting
policy as a condition of a plan's investing
in such vehicle.
Crypto Risks for Plan
Fiduciaries
That the enforcement action of a $4.3
billion Treasury Department fine
against Binance Holdings Ltd.-a global
company operating the largest cryptocurrency
exchange in terms of daily trading
volume of cryptocurrencies-came only
a day after charges were filed against
another crypto exchange should factor
into the due diligence of any fiduciary
considering cryptocurrency investments
for a retirement plan. So says Marcia
Wagner, the founder of, and managing
partner in, The Wagner Law Group.
The firm had just the day before,
past November 20,
this
commented
on the first of the two instances. The
Securities and Exchange Commission
had charged Kraken, a crypto exchange,
for operating without being registered,
prompting Wagner partner Kimberly
Shaw Elliott to caution fiduciaries on the
risks of crypto assets, given their compliance
issues:
" The SEC's new enforcement activity
should be a clear warning to not only
unregistered crypto providers and the
advisers who recommend crypto investments,
but also to retirement plan fiduciaries
who approve those investments, " she
wrote. " Is it prudent to place faith in the
seller or holder of crypto who does not go
through the rigors of registration? "
The Department of the Treasury's
record-breaking fine of Binance further
compounds the fiduciary risks of crypto
assets. The SEC had, last June, charged
the entity with operating as an unregistered
securities exchange, and those allegations
have yet to be resolved.
Of the Binance fine, Wagner, says, " I
do not believe that the amount of the fine,
per se, will have an effect upon a plan
fiduciary's decision whether to include
or possibly remove or reduce the level of
crypto assets in some form on its investment
platform, but the fact of the SEC
action against Binance, as well as other
recent events such as the fraudulent activities
of FTX, [for a third crypto exchange
collapse,] would clearly be a factor a plan
fiduciary would need to take into account
as part of its due diligence in determining
the prudence of such an investment. "
She adds, " Since the Department
of Labor guidance regarding cryptocurrency,
in my experience, clients have not
shown an interest in including crypto
assets on their investment platform, if for
no other reason than the litigation risk
if a crypto asset fund on a plan's investment
platform went sideways. That litigation
risk is now obviously heightened. "
According to
the Department of
Justice, Binance pleaded guilty to a
wide range of federal charges including
money laundering, violating sanctions
and unlicensed money transmitting as
part of its settlement. -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
http://www.PLANSPONSOR.com/compliance http://www.PLANSPONSOR.COM
PLANSPONSOR - January - February 2024

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