SEC outlines proxy voting advice amendment

The U.S. Securities and Exchange Commission (SEC) recently voted to adopt rule amendments governing proxy voting advice as proposed in November 2021.

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“I am pleased to support these amendments because they address issues concerning the timeliness and independence of proxy voting advice, which would help to protect investors and facilitate shareholder democracy,” SEC Chair Gary Gensler said. “It is critical that investors who are the clients of these proxy advisory firms are able to receive independent and timely advice.”

The revisions seek to avoid burdens on proxy voting advice businesses, potentially impairing the timeliness and independence of their advice. The amendments also target misperceptions regarding liability standards applicable to proxy voting advice and preserve investors’ confidence in the integrity of such advice.

The amendments rescind two rules applicable to proxy voting advice businesses the SEC adopted in 2020, particularly conditions to the availability of two exemptions from the proxy rules’ information and filing requirements on which proxy voting advice businesses rely.

Additionally, the final amendments delete the 2020 changes made to the proxy rules’ liability provision. However, while the 2020 changes were intended to clarify the application of this liability provision to proxy voting advice, they created a risk of confusion regarding the application of the provision to proxy voting advice – which undermined the goal of the 2020 changes.