Comment on Proposed Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice
Bottom Line: The Committee generally supports the SEC proposal on proxy advisor rules. Yet it suggests some simplification to the review process proposed in the amendments that may serve to make them less cumbersome.
The Committee strongly supports the provisions of the proposed amendments that would require enhanced disclosure about conflicts of interest, methodology, sources of information, standards on which voting recommendations are based, and related matters. It believes that these disclosures would be beneficial to the proxy voting process and in the public interest.
It believes that it is appropriate that the proxy voting advice provided by proxy voting advice businesses be subject to Rule 14a-9, which prohibits materially misleading misstatements or omissions in proxy solicitations.
The Committee supports the proposal to require that proxy advisors provide registrants and certain other soliciting persons the opportunity to review and comment on their proxy voting advice before such advice is communicated to client stockholders. Yet the Committee does not see a basis for excluding smaller registrants, or registrants asking stockholders to vote at special meetings from the opportunity to review and provide feedback on proxy voting advice.
The Committee also acknowledges the view of proxy advisors that what registrants sometimes deem "factual errors" are often merely differences of opinion. However, the fact that not all instances of accused factual errors are in fact factual errors suggests that this proposal to allow them to be corrected is needed.
The Committee acknowledges that the proposed review process may be viewed as quite cumbersome, and would support any recommendations to simplify it. For example, the requirement that proxy advisors provide registrants and certain other soliciting persons with a final notice of voting advice could be limited to instances in which the final proxy voting advice contains material changes from the version initially provided to registrants.
The Committee also suggests that the Commission study and consider whether there is an alternative to the proposed requirement that proxy advisors include a hyperlink to the registrant's or other soliciting person's responsive statement in their proxy voting advice. It believes that, ideally, a registrant's statement addressing proxy voting advice should be provided to stockholders by the registrant.
The Committee believes that the provision of an advance draft of the proxy voting advice to registrants may give them the opportunity to prepare a responsive statement and provide it to stockholders prior to voting.
Read the full comment letter here.