On Nov. 5, 2019, the SEC proposed amendments to its rules that exempt proxy voting advice businesses from the filing of information requirements under the federal proxy rules. The proposed amendments include:
- Exchange Act Rule 14a-1(l): Specifying the circumstances where the proxy voting advisor will be considered to be engaged in a solicitation.
- Rules 14a-2(b)(1) and 14a-2(b)(3): Proxy voting advice businesses relying on these filing exemptions would be subject to the undermentioned conditions:
- Disclose material conflicts of interest in their proxy voting advice;
- Allow registrants and soliciting persons to review and provide feedback on proxy voting advice
- Include a hyperlink to registrant’s or soliciting person’s views on the proxy voting advice in their voting advice on request
Allow proxy voting advice businesses to enter into confidentiality agreements with registrants and soliciting persons for materials exchanged, and avail exemptions where failure to comply was immaterial or unintentional.
- Rule 14a-9: Specify information on where the failure to disclose certain information in the proxy voting advice is considered misleading within the rule’s meaning.
In the 60-day public comment period, The Securities Transfer Association (STA) sent a letter to the SEC on behalf of transfer agents with two suggestions they considered essential to successful proxy reform:
- Strict reconciliation of voting entitlement: The STA advocates universal, strict reconciliation of voting entitlement by proxy voting advice businesses. Their suggestion specified brokers and banks to make adjustments (such as debits) to match the number of issued voting instruction forms with the share entitlements.
- Reforms in NOBO/OBO rules: STA suggested disclosing NOBO information directly to the issuer for use and administration in its own proxy voting and sending those reports electronically. The working group also asked to make the OBO status as opt-in only and never default for any investor when opening or modifying an account.
The SEC announced amendments to its rules on July 22, 2020, with the priorities specific to their plan. Click here to read about adopted amendments.
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