Tag: proxy solicitation rules

SEC adopts amendments regarding proxy advisory firms (updated)

This post is a revision of my earlier post, updated to reflect the adopting release for the final rule and the supplemental guidance. 

Earlier this week, at a virtual open meeting, the SEC, by a vote of three to one, adopted new amendments to the proxy rules, modified from the original proposal issued in November last year, regarding proxy advisory firms (see this PubCo post). The amendments make proxy voting advice subject to the proxy solicitation rules and condition exemptions from those rules for proxy advisory firms, such as ISS and Glass Lewis, on disclosure of conflicts of interest and adoption of principles-based policies to make proxy voting advice available to the subject companies and to notify clients of company responses. The amendments also provide two non-exclusive safe harbors designed to satisfy the conditions to the exemptions. The SEC also voted by the same margin to publish new supplementary guidance for investment advisers addressing how advisers should consider company responses in light of the new amendments to the proxy rules. SEC Chair Jay Clayton observed that the final rules and guidance are the product of a 10-year effort—commencing with the SEC’s  2010 Concept Release on the U.S. Proxy System—which has led to “robust discussion” from all market participants.  The original proposal issued in November generated substantial comment and criticism, and the SEC took much of it into account in developing the final rule, which now only “encourages” what had been imperative in the proposal—namely that proxy advisors conduct a review and feedback process with issuers.

SEC adopts amendments regarding proxy advisory firms

This morning, at an actual uncancelled open (virtual) meeting, the SEC, by a vote of three to one (I wrote that part before the meeting), adopted new amendments to the proxy rules, modified from the original proposal issued in November last year, regarding proxy advisory firms (see this PubCo post). The amendments make proxy voting advice subject to the proxy solicitation rules and condition exemptions from those rules for proxy advisory firms, such as ISS and Glass Lewis, on disclosure of conflicts of interest and adoption of principles-based policies to make proxy voting advice available to the subject companies and to notify clients of company responses. The amendments also provide two non-exclusive safe harbors that satisfy the conditions to the exemptions. The SEC also voted by the same margin to publish new supplementary guidance to investment advisers addressing how advisers should consider company responses in light of the new amendments to the proxy rules. SEC Chair Jay Clayton observed that the final rules and guidance are the product of a 10-year effort—commencing with the SEC’s  2010 Concept Release on the U.S. Proxy System—which has led to “robust discussion” from all market participants.  The original proposal issued in November generated substantial comment and criticism, and the SEC took much of it into account in developing the final rule, which now encourages what had been imperative in the proposal—namely that proxy advisors conduct a review and feedback process with issuers.