AdvisersFundsSEC

FYI: SEC Issues Proxy Voting Guidance for Advisers

FYI: At its open meeting today, the SEC voted (3 to 2, Commissioners Jackson and Lee voting ‘no’) to publish guidance regarding the proxy voting responsibilities of investment advisers under Advisers Act Rule 206(4)-6 and related registration and reporting forms under the Investment Company Act.

It is worth noting that the SEC has been discussing proxy voting issues from many angles for quite some time. Importantly, last fall, the Division of Investment Management withdrew two previously issued no-action letters — Egan-Jones Proxy Services (May 27, 2004) and Institutional Shareholder Services, Inc. (Sept. 15, 2004) — addressing advisers’ use of proxy advisory firms. These letters were withdrawn purportedly to facilitate the on-going proxy voting discussion, with the expectation that the SEC staff would utilize whatever it learned in that discussion in any future recommendations to the Commission on proxy voting. At the same time that the two no-action letters were withdrawn, the previously issued proxy voting guidance appearing in Staff Legal Bulletin No. 20 (June 30, 2014) was left intact.

SLB20 is now tied to the guidance issued today. According to statements made at the SEC meeting, today’s guidance “updates and elevates” SLB20 and comes from the SEC itself, rather than merely the SEC staff. The guidance addresses how advisers and their clients can scope their relationship to include whether and when an adviser must vote proxies on behalf of the client, as well as how an adviser can document that it has undertaken proxy voting in accordance its fiduciary duty to act in clients’ best interests, even when the adviser chooses to use the services of a proxy advisory firm in the process.

Once posted, the release containing guidance issued to advisers today is expected to be available here: https://www.sec.gov/rules/interp.shtml.

Simultaneously with the guidance issued to advisers today, the SEC voted to issue an interpretation and related guidance addressing whether and when proxy advisory firms are engaged in “solicitations” subject to the general ’34 Act proxy rules. Once posted, that guidance is also expected to appear on the page linked above.

* * *