SEC Adopts Rule Amendments, Guidance on Proxy Voting
The SEC in a 3-1 vote adopted amendments to its rules governing proxy solicitations and said the amendments aim to facilitate the ability of those who use proxy voting advice—investors and others who vote on investors’ behalf—to make informed voting decisions without imposing undue costs or delays. “Today’s actions ensure that those who take on the responsibility of investing and voting on behalf of our Main Street investors have the accurate and … useful information necessary to make an informed voting decision for the benefit of those investors,” said SEC Chairman Jay Clayton. The amendments provide proxy voting advice firms two exemptions from certain of the federal proxy rules conditioned on their compliance with conflicts of interest disclosure requirements. The exemptions are also conditioned on two principles-based requirements designed to ensure that: (1) registrants that are the subject of proxy voting advice have such advice made available to them in a timely manner, and (2) clients of proxy voting advice businesses are provided with an efficient and timely means of becoming aware of any written responses by registrants to proxy voting advice. In addition, the rule amendments codify the SEC’s longstanding view that proxy voting advice generally constitutes a solicitation under the proxy rules, and make clear that the failure to disclose material information about proxy voting advice may constitute a potential violation of the anti-fraud provision of the proxy rules. The SEC also provided supplemental guidance to assist investment advisers in assessing how to consider additional information from issuers that may become more readily available as a result of the proxy solicitation rule amendments. Commissioner Allison Herren Lee dissented, describing the rule as unwanted, unwarranted and unworkable. She wrote that the rule will increase issuer involvement in what is supposed to be independent advice from proxy advisory firms and add significant complexity and cost into the proxy voting system, among other criticisms.