SEC Issues Staff Bulletin on Proxy Voting

The SEC Divisions of Investment Management and Corporation Finance issued a staff bulletin regarding investment advisers’ responsibilities in voting client proxies, retaining proxy advisory firms, and the requirements of exemptions to the federal proxy rules that are often relied upon by proxy advisory firms.

The bulletin consists of a series of questions and answers pertaining to proxy voting, including the following:

  • Is an investment adviser required to vote every proxy?
  • What are some of the considerations that an investment adviser may wish to take into account if it retains a proxy advisory firm to assist in its proxy voting duties?
  • Does an investment adviser have an ongoing duty to oversee a proxy advisory firm that it retains?
  • What are an investment adviser’s duties when it retains a proxy advisory firm with respect to the material accuracy of the facts upon which the proxy advisory firm’s voting recommendations are based? 
  • When is a proxy advisory firm subject to federal proxy rules?

Lofchie Comment: Arguably, the most important point in this bulletin is that investment advisers are not required to vote every proxy. In particular, the bulletin concludes that “an investment adviser and its client may agree that the time and costs associated with the mechanics of voting proxies with respect to certain types of proposals or issuers may not be in the client’s best interest.” If investment advisers do not feel pressured to vote on matters that are of no interest to them or their clients, then they will not feel obligated to waste money paying proxy advisers to tell them how to vote on those matters. Consequently, the power of proxy advisers will be diminished.

See: Staff Legal Bulletin on Proxy Voting: Proxy Voting Responsibilities of Investment Advisers and Availability of Exemptions from the Proxy Rules for Proxy Advisory Firms.


Comments are closed.