US SEC proposes to rebalance proxy voting advice rules
Change is underway in the US Securities and Exchange Commission’s (SEC) rules on proxy voting. It is currently consulting on new requirements for asset managers to disclose voting information in a structured data format, potentially giving a significant boost to the usability and usefulness of this information.
Meanwhile, the Commission has proposed amendments to its rules on proxy voting advice. These would rescind two rules adopted in 2020, requiring proxy advisors to meet additional requirements in facilitating and providing information on company responses to proxy voting advice, and also potentially expanding the scope of advisory firms’ liability for their advice. “The proposed amendments aim to address concerns expressed by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses to undue litigation risks and compliance costs,” says the SEC.
While the importance of proxy voting advice was universally agreed upon, the decision to overturn these recent rules was not supported by all Commissioners, with the dissenters raising transparency and investor-protection concerns. Those in favour emphasised the need to meet investor needs. “Proxy voting advice is integral to our current system of corporate governance and shareholder democracy. And the independence of that advice is essential. Independent advice informs and empowers investors’ voting decisions,” stated Commissioner Caroline A. Crenshaw. Given the inevitable information asymmetry between investors and corporations themselves, “strengthening independence and ensuring that the costs of voting advice are not prohibitive are important objectives.”