On November 2, the SEC adopted a series of amendments that will significantly change existing rules governing (1) the integration of offerings, (2) offering/investment limits, (3) communication limitations and (4) eligibility for Regulation Crowdfunding and Regulation A. The amendments will also make various changes that will improve access to offerings under Regulation D, Regulation A and Regulation Crowdfunding. A chart summarizing the amendments is included in the SEC press release and fact sheet, which was released along with the amendments. The amendments will be effective 60 days after publication in the Federal Register, which will likely result in the amendments becoming effective in early February of 2021. The amendments will be discussed in more detail in an upcoming Goodwin client alert.
On October 30, the DOL finalized a rule revising the longstanding investment duties regulation, generally requiring fiduciaries of ERISA plans or ERISA pooled funds to base investment decisions only on pecuniary factors. Pecuniary factors are defined as those that a fiduciary prudently determines are “expected to have a material effect on the risk and/or return of an investment based on appropriate investment horizons consistent with the investor’s investment objectives and funding policy.” The rule would inhibit fiduciaries from considering environmental, social, governance (ESG) or similar factors (whether in individual investment decisions or investment strategies, screens or policies), which may divert investments from fossil fuel, weapons, gaming and similar industries in favor of industries sensitive to issues like climate change, workforce diversity and inclusion and pay equality. ESG considerations remain permissible in two circumstances: (1) where the ESG considerations are pecuniary in nature, and (2) as a “tie breaker” where pecuniary considerations do not produce a “winner” among reasonably available investment alternatives. Additional conditions apply to the second circumstance that may substantially limit its use. While the rule governs only ERISA plans and ERISA pooled funds, it will affect those investors’ choices of other investments, including both registered and private funds, dampening, if not eliminating, interest in funds that expressly employ ESG strategies, screens or other considerations for non-pecuniary purposes (e.g., funds that pursue a “double bottom line”). Funds that employ ESG considerations only for pecuniary purposes but do not make that practice clear in fund disclosures should revisit them. The rule takes effect 60 days after publication in the Federal Register.