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September 30, 2021

SEC proposes new rule requiring asset managers to disclose proxy votes

By Verdict Staff

The US Securities and Exchange Commission (SEC) has proposed a new rule that would need investment companies to disclose additional information on their proxy vote.

In its proposal, the SEC requires institutional investment managers to report their vote in connection with certain executive compensation matters to investors on Form N-PX.

Registered investment companies, including mutual funds and exchange-traded funds, are required to submit Form N-PX annually to disclose information relating to how they voted companies’ shares.

The SEC said that the proposed amendment would help investors ‘to more easily understand and analyse proxy voting information that filers report’.

The proposed rules would also require funds and managers to reveal how their securities lending activity impacted their voting.

They would also need to standardise the description of matters voted on, categorise the various types of votes cast, and disclose the required information using structured or electronically tagged data.

Categories and subcategories outlined by the regulator include greenhouse gas emissions, diversity, equity and inclusion as well as corporate matters such as share buybacks and asset sales.

SEC chair Gary Gensler said: “If finalised, today’s rules would bring standardisation and usability to this important form, updating it for today’s technologies.

“Investors will be able to see information tagged by categories, and they’ll be able to access this information in a format that is easy to analyse electronically.”

The SEC proposal is said to target funds that oversee trillions of dollars for investors.

Money managers who vote on behalf of investors can influence the company’s all major decisions, including appointments, acquisitions, and executive pay.

The latest SEC proposal aims to bring more transparency to the process, allowing investors to understand how asset managers use shareholder votes on their behalf.

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