DOL Signals ERISA Oversight of Proxy Advisors in New Guidance

The U.S. Department of Labor has escalated regulatory pressure on proxy advisory firms, issuing new guidance that could subject the industry to federal fiduciary standards under ERISA and reshape how shareholder voting advice is delivered to retirement plans.

In a technical release from the Employee Benefits Security Administration, the agency said proxy advisors “regularly fit the definition of functional fiduciaries” if they exercise control over shareholder votes or provide investment advice for a fee. The clarification effectively expands the scope of fiduciary accountability across a key segment of institutional investing.

The guidance underscores that proxy voting itself is a fiduciary act under ERISA and must be carried out “for the exclusive purpose of maximizing risk-adjusted return,” signaling a stricter standard for how recommendations are formulated and applied. It also warned that firms could face liability if their advice deviates from that mandate.

At the same time, the Department indicated that certain state-level regulations would “generally not be preempted” by ERISA, particularly those requiring disclosures when recommendations are not grounded in financial considerations.

The move builds on broader scrutiny from the Trump administration, including a December 2025 executive order that cited Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC and raised concerns about their “outsized influence” over corporate governance decisions.

Notably, the guidance extends beyond proxy advisors themselves, stating it “looks beyond the proxy advisors” to assess when other market participants—such as large asset managers or sovereign wealth funds—may also qualify as fiduciaries.