With a party-line vote, the three Republican SEC Commissioners today approved a slightly less atrocious version of their proxy advisory firm rule. We will be posting more information and further reactions later.
The US Securities and Exchange Commission on Wednesday approved new restrictions on proxy advisers but dropped a measure that would have required the influential firms to give corporate executives advance notice of their advice.
Proxy advisory firms such as Institutional Shareholder Services and Glass Lewis advise shareholders how to vote and wield significant influence in public markets, particularly in fiercely contested battles between companies and activist investors.
The firms issue guidance on a wide range of matters, from director elections and executive pay packages to mergers and acquisitions and environmental issues. Business leaders have chafed at the role the firms play in forcing change at companies.
The SEC under Jay Clayton, who was appointed by President Donald Trump in 2017, has sought to rein in these firms by requiring more extensive disclosures of potential conflicts of interest as well as restrictions on how they publish their advice.
The rule, approved on Wednesday in a 3-1 vote, requires proxy firms to share rebuttals to their advice from executives, defines instances where omitting information could constitute fraud and places proxy advisers under SEC regulation governing solicitation.
An initial version of the rule proposed in November last year would have also required proxy advisers to submit their recommendations to corporate executives for review and comment before publication.
The commission retreated from this position, with the final rule only requiring proxy advisory firms to provide their research to companies at the same time as their investor clients.
The rule was accompanied by guidance for investment advisers about “robo-voting”, where they submit votes automatically based on the advice received from proxy firms, reminding them to consider all available information as part of their duty of care.
“Voting is an important responsibility and if new material information becomes available, they should review and assess it,” said Elad Roisman, the Republican SEC commissioner who has led the rulemaking on proxy adviser firms, on Wednesday.