SEC proposes enhanced, structured disclosures on proxy votes
XBRL looks set to be deployed for reporting on funds stewardship in the US, facilitating access to information on how asset managers are voting at AGMs. The US Securities and Exchange Commission (SEC) has proposed rule changes to enhance the information disclosed by investment funds about their proxy votes, in the form of amendments to its Form N-PX. Crucially, in addition to improvements to the content of disclosures, it would require filers to use “an XML structured data language.” The SEC already has world-leading experience in extensive deployment of Inline XBRL for disclosures via its EDGAR portal, making this the natural choice of format.
“This proposal will make it easier and more efficient for investors to get crucial information about proxy votes from funds,” said SEC Chair Gary Gensler. As he discussed in a statement, Form N-PX is long and complicated, yet the information is difficult to use. Votes may be reported vaguely or inconsistently, and the lack of a machine-readable format impedes analysis. “Thus, I support today’s proposal to make the information on Form N-PX more consistent, comparable, and decision-useful for investors. If finalized, today’s rules would bring standardization and usability to this important form, updating it for today’s technologies. Investors will be able to see information tagged by categories, and they’ll be able to access this information in a format that is easy to analyze electronically.” This would facilitate investors in monitoring how their funds vote and compare different funds’ voting records.
We are delighted to such enthusiastic endorsements for structured reporting. Commissioner Allison Herren Lee welcomed the proposals, both in the public interest and for the protection of investors. “In service to transparency, I’m very pleased to see today’s proposal will require voting information to be disclosed in a structured, machine-readable format,” she stated. “Voting data is important not just at the micro level—meaning a specific vote on a specific ballot issue at a specific company–but also at the macro level and in various aggregate forms—meaning whether and how funds, fund complexes, and managers vote broadly when it comes to contested issues or certain kinds of public policy proposals and how that voting compares to the voting of others. Structured data will facilitate both types of analyses, and I look forward to feedback from commenters on whether and how we can further improve the proposal in this respect.”
Two Commissioners expressed reservations as to the extent that the proposals will serve investors rather than other stakeholders. Commissioner Elad L. Roisman nonetheless recognised the value of updating Form N-PX to make it more useful, ultimately voting in favour. “When I have reviewed Forms N-PX that have been filed with us, I have found it frustrating to see funds list their votes on agenda items opaquely labeled as ‘Miscellaneous,’” he commented. “I can see how having forms filed electronically with the Commission in a structured format can allow investors to more easily analyze the content.”
The proposals would also require institutional investment managers to disclose voting on executive compensation, or ‘say-on-pay’ matters. They will shortly be published in the US Federal Register, beginning a 60-day comment period, so do respond if you are interested in these new reporting and analytical possibilities in the US.