On July 13, 2022, the SEC voted to adopt amendments to its rules governing proxy voting advice as proposed in November 2021. The final amendments aim to avoid burdens on proxy voting advice companies that may impair the timeliness and independence of their advice. The amendments also address misperceptions about liability standards applicable to proxy voting advice while also preserving investors’ confidence in the integrity of such
Proxy advisory firms help shareholders exercise their right to vote on matters at issue in the public companies they invest by providing advice according to predetermined policies and facilitating the vote execution process. Investors rely on such proxy advisory firms to stay informed about not only the company, but on shareholder proposals as well. In July of 2020, the SEC adopted rules establishing new requirements for proxy advisory firms.
However, since then, investors have expressed strong concerns about the 2020 rules’ impact on their ability to receive independent proxy voting advice in a timely manner.
The 2020 rules added conditions in Rule 14a-2(b)(9)(ii) to exemptions from the proxy rules’ information and filing requirements. First, those conditions required proxy advisory firms to make their advice available to the companies that are the subject of their advice at or before the time that they make the advice available to their clients. Secondly, the conditions required proxy advisory firms to provide their clients with a mechanism by which they could reasonably be expected to become aware of any written statements by registrants who are the subject of the advice regarding the proxy advisory firms’ proxy voting advice. Under the current amendments, the SEC is rescinding Rule 14a-2(b)(9)(ii).
The 2020 rules included supplemental guidance to investment advisers about their proxy voting obligations. The supplemental guidance was somewhat prompted by the Commission’s adoption of the conditions set forth in the aforementioned Rule 14a-2(b)(9)(ii). The current adopting release rescinds the supplemental guidance.
The 2020 rules also amended Rule 14a-9, which prohibits false or misleading statements, by adding Note (e), which set forth examples of material misstatements or omissions related to proxy voting advice. Specifically, Note (e) provided that the failure to disclose material information regarding proxy voting advice could be misleading. The final current amendments delete Note (e) to Rule 14a-9.
The adopting release will be published on SEC.gov and in the Federal Register, and the final amendments and rescission of the guidance will become effective 60 days after publication in the Federal Register.