Menu

Guidance for Investment Advisers Using Proxy Advisory Firms

Securities and Derivative Litigation   |   September 16, 2014
Download   
Share Page

A recent SEC Staff Legal Bulletin provides important guidance for investment advisers that use proxy advisory firms in voting clients’ securities. Nevertheless, the Bulletin (dated June 30, 2014) leaves much unresolved.

For years, critics have argued that proxy advisory firms have too much influence and raise conflict of interest and other regulatory issues that have been inadequately addressed (see "SEC Radar Targets Proxy Voting Advice," Expect Focus, Vol. I, Winter 2012). Although some have envisioned that the SEC would take formal action to impose significant additional regulatory requirements, the Bulletin merely expresses current views of the SEC staff and is not binding on the Commission.

While the Bulletin, dated June 30, 2014, sets forth numerous practices that investment advisers may wish to follow, the practices would generally involve refinements rather than marked changes in investment advisers’ current operations. Moreover, the staff frames most of these practices as suggestions for consideration, not things investment advisers "must" or even "should" do.

The staff’s stronger statements in the Bulletin include guidance that investment advisers "should":

  • review at least annually the adequacy of their proxy voting policies and procedures;
  • ascertain that proxy advisory firms that they retain have the capacity (a) to adequately analyze proxy issues and, (b) to make any voting recommendations on the basis of accurate information;
  • reasonably assure themselves that any proxy advisory firms that they determine to have based recommendations on inaccurate information take responsive actions that are reasonably designed to prevent recurrences; and
  • implement measures reasonably designed (a) to provide sufficient oversight of proxy advisory firms to ensure that the investment advisers meet their proxy voting obligations to clients and (b) to identify and address the relevant conflicts of interest to which the proxy advisory firms can be subject.


©2019 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.