August 11, 2014 Bruce Goldfarb Discusses New SEC Guidance on Proxy Advisors in IR Magazine

Proxy advisory firms must proactively reveal potential conflicts of interest, commission guidance says

Asset managers that use proxy advisory firms should review their voting policies at least once a year, the SEC says in a guidance bulletin, also telling the advisory firms they must reveal potential conflicts of interest to their clients.

 The bulletin further outlines steps asset managers must take to determine whether their clients are benefiting from the services of a proxy advisory firm – including regular sampling of proxy votes.


As part of an investment adviser’s ongoing compliance program, it should review, no less frequently than annually, the adequacy of its proxy voting policies and procedures to make sure they have been implemented effectively,’ states the SEC’s legal bulletin, designed to provide guidance for investors and proxy firms.

The review should determine ‘whether these policies and procedures continue to be reasonably designed to ensure proxies are voted in the best interests of clients’ as well as establish ‘that the proxy advisory firm has the capacity and competency to adequately analyze proxy issues, which includes the ability to make voting recommendations based on materially accurate information.’

In addition, the SEC says proxy advisory firms have a duty to proactively disclose potential conflicts of interest, including significant relationships with other companies, to their clients, noting that ‘we do not believe boilerplate language that such a relationship or interest may or may not exist provides such notice.’

Bruce Goldfarb, CEO of proxy solicitor Okapi Partners, says the bulletin ‘may have significant impact’ on corporate election campaigns. ‘For the IR professional, it will be even more crucial to know your shareholders because investors will have new alternatives in making voting decisions – possibly deciding not to vote at all in some cases,’ he explains. ‘[This] could make it more difficult to get an agenda item passed without a well-planned outreach campaign.’

SEC tells asset managers to review proxy advisers every year [IR Magazine]

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