August 4, 2020
SEC Adopts Rule Amendments, Issues Guidance on Proxy Voting Process
On July 22, 2020, the United States Securities and Exchange Commission adopted rule amendments and issued additional guidance on the proxy voting responsibilities of investment advisers and third-party proxy voting advice service providers. The goal of the new provisions is to provide greater transparency to investors while minimizing potential cost and operational burdens of the proxy voting process.
The amendments focus on changing definitions of “solicit” and “solicitation” in the rule; exempting proxy voting advice companies, such as ISS and Glass Lewis, from the information and filing requirements of the federal proxy voting rules, with certain conditions; and adding new provisions to protect against conflicts of interest. Below are key takeaways from the new requirements:
WHAT DOES THIS MEAN FOR ME?
When choosing to engage a proxy advisory firm, investment advisers should adequately review the potential service provider’s policies and procedures regarding conflicts of interest. Depending on the firm’s circumstances, this review could include assessing whether:
The SEC adopted the amendments with the intention of removing cost and time burdens and barriers from voting investors and those voting on behalf of investors, such as registered investment advisers. However, opponents of the provisions argue the amendments add an unneeded step for service providers and could obstruct the proxy voting process overall.
The new amendments go into effect for proxy voting service providers later this year; they will be required to comply with the rule on Dec. 1, 2021.
If your firm engages a third party proxy voting service, these provisions may affect what information and how frequently they are required to communicate with you. Contact Fairview with questions about how the new requirements may impact your firm’s proxy voting process.