This week, the Securities and Exchange Commission finalized rules requiring proxy advisory firms to provide access to final proxy reports to all companies and to distribute company responses to voting recommendations to investor clients.
The SEC’s actions capped a nearly two-year long rulemaking effort focusing on the proxy process in which the Association’s Center On Executive Compensation played a major role in ensuring regulators understood the concerns surrounding proxy advisory firms.
- All companies must have the ability to obtain a final proxy report prior to or in conjunction with general distribution to a proxy advisor’s clients.
- Proxy advisors must notify investor clients of and provide a hyperlink to a company response to the proxy advisory firm report in “a timely manner before the shareholder meeting (or, if no meeting, before the votes, consents, or authorizations may be used to effect the proposed action).” On the timing, in his remarks, Commissioner Roisman noted the notification of a company response must be issued “in a timely manner before those clients vote.”
- Proxy advisors must provide specific conflict of interest disclosures in the proxy report or within the medium delivering the proxy report to investors.
- Proxy reports constitute a federal proxy solicitation subject to anti-fraud rules. The SEC officially codified its view that proxy voting recommendations provided by proxy advisory firms constitute a federal proxy solicitation subject to federal rules – a view which underpins the entirety of the new requirements.