State and Local Legislation to Watch

Of particular interest for advisors, Delaware recently passed legislation allowing estates to invest in ESG, specifically noting that investment strategies may consider the beneficiaries’ values and beliefs.

Tis the season. No, not that season, tax season. Many Americans may opt to take advantage of federal extensions for filing their taxes. But not all states have offered similar extensions. That reminds us that when it comes to income, investing and saving for retirement, it isn’t only federal laws to keep an eye on. States may be creating new challenges and opportunities for investors as well. Here are a few of the legislative issues we’ve noticed in the last year.


Like many, you may have been keeping an eye on ESG funds as to how they have performed through the years. We’ve discussed ESG funds before and we will continue to track developments about them.[1] A quick synopsis of ESG includes “SRI is an investment strategy that seeks both financial return and social good – beyond just impact on the environment or a restriction on investing in companies that make certain products (like guns, alcohol, fast food, or pornography) – but looks for an effort to positively impact their community through investment, such as by investing in small businesses in low wealth neighborhoods.” ESG, which stands for Environment, Social and Governance, stems from that Socially Responsible Investment platform.

We’ve also kept an eye on how others might be taking advantage of this trend and cautioned investors to beware of greenwashing.[2] States are keeping their eyes on that trend as well.

As reported in Bloomberg news,[3] that while the feds seem to have taken a pass at regulating both SRI and the subsection of ESG, states may be not quite so hesitant. States can draft their own securities laws, sometimes referred to as Blue Sky Laws.[4] Many states’ initiatives are aimed at increasing ESG funds. The result, unfortunately is what some call a “patchwork” of state level laws. That can be tough to track for businesses, but may be helpful for investors.

On the federal level, two new bills were introduced that aim to clarify the role that ESG plays in an investment manager’s decisions. That legislation, if passed, would require an investment manager to have a written policy explaining ESG decisions for employees to review. The bills expand a beyond ESG into the broader sense of SRI, in that they consider “worker wages and rights, environmental risks, political spending and human rights policies”[5] as part of the consideration (often worker rights are not included in definitions of ESG).

Additionally, state pension funds, like CALPERS, often thought of as a signaler for regulators as to its investment choices, has been making strides on defining ESG more carefully, perhaps seeking to be careful against greenwashing issues. Other states with large pension systems, like New York and Washington may be doing the same, and joined by some large city pension funds, like Seattle and Boston. Some states, like Illinois, have even passed new legislation (as of January 2020) concerning how those pension funds invest in ESG.

Of particular interest for advisors, Delaware recently passed legislation allowing estates to invest in ESG, specifically noting that investment strategies may consider the beneficiaries’ values and beliefs.

As reported in the Texas Tribune,[6] state legislators in Texas are urging investment away from companies that would boycott fossil fuels. This comes as a reaction to ESG funds that may have decided to move investments out of fossil fuels as being not environmentally friendly. In the 1980s, this move was called “divesting.” Texas’s plan is to flip the divesting game and require that Texas’s large pension funds and school endowments divest from companies, like mega-investor BlackRock, that have decided to move investments away from fossil fuel companies. The total AUM of those pension funds is more than $201 billion.

Legislation Specific to Advisors:

Circling back to Blue Sky Laws, and our discussion of them, we last wrote about that in the context of the fiduciary duty and obligation laws. There we said “…with regard to registration, the federal law sets out that ‘no state law, rule, regulation, order or other administrative action requiring or regarding the registration or qualification of securities or securities transaction may apply directly or indirectly to a covered security.’ Other provisions prohibit states from interfering with communications (prospectus, proxy, reports)….But, states do retain jurisdiction to investigate and bring enforcement actions based on unlawful conduct or deceit in connection with securities transactions, in other words, fraud.” Since that article, Massachusetts adopted rules imposing a fiduciary obligation on independent financial services firms and New Jersey is considering a similar move.[7] More states may be joining in the fray, creating a “hodgepodge” of laws.[8]

States are also making headway on protecting seniors from elder abuse, a topic we last addressed in 2018.[9] More than half of the US states have adopted on this topic that is based on a model law, meaning, should have a high level of similarity across the states. Advisors should note that some of these laws may require them to take specific action.

[1] For previous articles, see

[2] See for more information.

[3] For the full article, see

[4] For more on the fed/state split as to securities, see

[5] For more information on these bills, see

[6] For the full article, see

[7] For an in depth discussion of those states’ laws, see

[8] For more on that see (which is beyond a paywall)

[9] For the full article, see

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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