Speech by Commissioner Roisman at the Council of Institutional Investors Conference

Summary of Study

Bottom Line: This speech by the Commissioner of the U.S Securities and Exchange Commission explains the steps the Commission has taken to address problems with proxy advisors and the proxy voting process and layout potential next steps.

The Commission has clarified and reaffirmed key aspects of investment advisers’ fiduciary duty, including as it relates to voting proxies and using the services of the proxy voting advice businesses. It has also reaffirmed its longstanding interpretation that, in general, voting advice provided by these businesses fits within the definition of “solicitation.”

Keeping in mind how useful proxy voting advice businesses’ services can be to their voting customers, the Commission also proposed new amendments to the exemptions from the Exchange Act proxy solicitation rules, which are tailored to proxy advisors' voting services and take into account current market practices.

The Commission has also proposed updated eligibility criteria for shareholders to submit proposals to be included in a company’s proxy materials.

The Commission's proxy reform actions will improve the accuracy of the voting advice before it is utilized by investors, improve the total mix of information available to investors when they make voting decisions, and require conflicts of interest disclosure.

One area where the Commission should act is to address proxy plumbing, where multiple investment intermediaries may share and contest voting responsibilities. Addressing proxy plumbing is not simple. It is an area of the market where many different types of actors are intertwined and entrenched in their current roles and have been for several decades.

The Commission should also consider adopting a universal proxy rule, which could provide benefits to everyone involved in a proxy contest, most importantly, the investors being solicited.

Read the full speech here