Further to last week's report, as anticipated, the SEC approved (Commissioner Lee dissenting) long-discussed, welcome proxy advisory firm reforms that include modifying the exemptions to the proxy solicitation rules relied upon by proxy advisors and supplemental guidance regarding investment advisors' use and reliance on proxy advisors relative to their proxy voting responsibilities.
Among other things, the rulemaking: (i) codifies that proxy voting advice constitutes a solicitation, (ii) requires substantive conflict of interest disclosure, (iii) provides for prior or concurrent disclosure of voting advice to companies and proxy advisor clients, and a means for clients to access the company's response to such advice before they vote, and (iv) illustrates by example circumstances under which proxy voting advice may be misleading under Rule 14a-9.
The SEC's action is the culmination of more than ten years of discussion on a highly controversial topic with the Society representing and advocating for the views and experiences of public companies, as reflected in part by our most recent comment letter on the November 2019 proposal (reported on here).
The amendments will be effective 60 days after publication in the Federal Register, but compliance by covered proxy advisors with the new Rule 14a-2(b)(9) amendments is not required until December 1, 2021. The supplemental guidance is effective upon its publication in the Federal Register.
See the SEC's release and fact sheet; these statements from SEC Chair Clayton and Commissioners Reisman and Peirce; this Pensions & Investments article; and real-time commentary and analysis on our Proxy Advisors page.
This post first appeared in today's Society Alert!