SEC Proposes Proxy Rule Amendments, More Transparency on Sec Lending

The SEC proposed rule amendments to enhance the information mutual funds, ETFs, and certain other funds report about their proxy votes. The proposed amendments would:

● Require funds and managers to tie the description of each voting matter to the issuer’s form of proxy and to categorize each matter by type to help investors identify votes of interest and compare voting records;

● Prescribe how funds and managers organize their reports and require them to use a structured data language to make the filings easier to analyze; and

● Require funds and managers to disclose how their securities lending activity impacted their voting.

Further, the rulemaking would require institutional investment managers to disclose how they voted on executive compensation, or so-called “say-on-pay.”  In a fact sheet, the SEC explained that investors may not have adequate transparency when funds do not cast votes because their securities are out on loan. The new proposal would require reporting persons to disclose the number of shares voted (or instructed to be cast), as well as the number of shares loaned but not recalled. Together, this information would provide context for understanding how securities lending activities affect the reporting person’s voting practices and, according to the fact sheet, would allow an investor to understand the magnitude of split votes (i.e., when a reporting person votes in multiple ways on the same matter). The public comment period on the proposal will remain open for 60 days after publication in the Federal Register.