EBSA Announces Enforcement Focus on Duty of Loyalty

Department of Labor’s EBSA to Target “Disloyal Pursuits” of ESG or DEI

Last Friday, Daniel Aronowitz, head of the Department of Labor’s Employee Benefits Security Administration (EBSA), announced the agency’s intent to focus enforcement action on violations of the duty of loyalty through asset misallocation. The policy was laid out in an April agency Field Assistance Bulletin.

Focus on ESG and DEI: Aronowitz stated EBSA “will target individual and entities who, acting in bad faith, misappropriate assets set aside for the benefit of the American worker” including the “disloyal pursuits of ESG, or its sister acronym DEI.”

Principles: The duty of loyalty requires fiduciaries to act exclusively for the benefit of plan participants and beneficiaries, avoiding conflicts of interest.

Quick to it: Aronowitz stated these investigations will be conducted “in a reasonable time frame” and will not be “open-ended investigations that drag on for years.”

Insight: Targeting ESG for enforcement action appears to go against the Department’s announcement to clarify ERISA safe harbor protection for all asset classes that use the six-step analytical framework.

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