SEC Issues Guidance on Investment Advisers’ Use of Proxy Firms and Application of Proxy Rules to Voting Recommendations; Proposes to Narrow Certain Exemptions to Proxy Rules—Part 1  

July 31, 2020

At an open meeting held on August 21, 2019, the Securities and Exchange Commission (SEC) voted along party lines to issue two guidance statements in connection with its longanticipated review of the role of proxy advisory firms in the proxy process. The first guidance statement (IA Release), which primarily interprets the Investment Advisers Act of 1940, outlines specific considerations and due diligence practices for investment advisers that engage proxy advisory firms for assistance in fulfilling their proxy voting responsibilities with respect to client securities. The second guidance statement (Exchange Act Release), which interprets the proxy provisions of (and related rules under) the Securities Exchange Act of 1934 (Exchange Act), sets forth the SEC’s view that recommendations from proxy advisory firms generally constitute “solicitations” under the federal proxy rules, thereby subjecting proxy recommendations to antifraud rules and liability under the Exchange Act. In addition, at a subsequent open meeting held on November 5, 2019, the SEC again voted along party lines to propose amendments (Proposed Amendments) that would impose additional obligations on proxy advisory firms seeking to rely on certain exemptions from the federal proxy rules.

Read Part 1 of " SEC Issues Guidance on Investment Advisers’ Use of Proxy Firms and Application of Proxy Rules to Voting Recommendations; Proposes to Narrow Certain Exemptions to Proxy Rules " here.

 

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