SEC amends proxy rules to address proxy voting advisors and issues guidance for investment advisers on use of automated voting platforms
July 24, 2020
Authored by: R. Randall Wang and LaDawn Naegle
On Wednesday, the SEC adopted amendments to the proxy solicitation rules relating to proxy voting advisors and issued new supplemental guidance relating to the proxy voting responsibilities of investment advisers when using automated voting.
We have prepared a client alert describing the amendments and guidance in more detail. The following is a brief summary.
The proxy rule amendments effected three principal changes:
- They codify the SEC’s previous interpretation that proxy voting advice produced by “proxy voting advice businesses” (PVABs or proxy advisory firms), such as ISS and Glass Lewis, generally constitutes a “solicitation” for purposes of Rule 14a-1(l) of the Securities Exchange Act of 1934.
- In order for PVABs to avoid the information and filing requirements of the proxy rules, PVABs must:
- Disclose material conflicts of interest to their clients as well as any policies and procedures used to identify, and steps taken to address, any material conflicts.
- Establish and publicly disclose policies and procedures reasonably designed to allow registrants that are the subject of the PVABs’ voting advice to be able to access that advice prior to or at the same time as the advice is disseminated to the advisory firms’ clients.
- Adopt and publicly disclose policies and procedures reasonably designed to ensure the PVABs provide their clients with a mechanism by which they can reasonably be expected to become aware of any written responses by registrants to such voting advice, in a timely manner before the shareholder meeting or other action.
- Third, the amended