Join Mint channel in your Telegram and stay updated with the latest business news. The 2019 Proxy Solicitation Position refers to the exemption from public filing with the SEC provided by Rule 14a-2(b)(3) described above; however, it also notes that the SEC is considering recommending rule amendments to address proxy advisory firms’ reliance on this exemption. © 2019 White & Case LLP, SEC Issues Guidance on Proxy Advisory Firms. While it is increasingly accepted that a wide range of governance-related factors impact investment returns, it requires significant work for each investment adviser to assess such factors. This clearly identifies proxy advisory firms, such as Institutional Shareholder Services (ISS) and Glass Lewis. POLICY CHANGES Director Attendance. "Further, the disclosures should especially address possible areas of potential conflict and the safeguards that have been put in place to mitigate possible conflicts of interest," the regulator added. With respect to peer groups that feature significantly in issuer proxy statements and proxy advisor analyses, the SEC states that “an investment adviser should also consider how the proxy advisory firm, in constructing peer groups, takes into account the unique characteristics of the issuer, to the extent available, such as the issuer’s size; its governance structure; its industry and any particular practices unique to that industry; its history; and its financial performance.” While this will likely force more disclosure by proxy advisors as to their methodologies, it is hard to avoid the implication that investment advisers need to review with care, on an individualized basis, the formulation of peer groups by proxy advisors on a company-by-company basis. The ability of proxy advisors to avoid filing their voting recommendations publicly is critical to their subscription business model. For proxy advisors, there should be a disclosure if there is any conflict of interest when they are giving their advice. The SEC also clarified that including the hyperlink to the company’s EDGAR filings would not, by itself, make the proxy voting advice business liable for the hyperlinked content. Your session has expired, please login again. Attorney Advertising. The SEC has, in particular, noted the importance of peer groups in the analyses provided by proxy advisors. They shall formulate the voting recommendation policies and disclose the updated voting recommendation policies to its clients. This provision does not outline any specific requirement as to the form by which the advisor’s recommendation is made available to the subject company. There must be a stated process for the proxy advisory firms to communicate with its clients and the company. As noted above, a public filing requirement for proxy advisor voting recommendations would fundamentally undermine their subscription business model. Echoing themes reflected in the 2019 Advisor Guidance, the 2019 Proxy Solicitation Position includes suggestions as to the types of information proxy advisors should consider disclosing to shareholders in order to avoid a potential violation of Rule 14a-9: 1 The 2019 Advisor Guidance is available here. The Staff also stated that once a proxy advisor assessed that its relationship with an issuer was “significant” or “material,” it is not sufficient to provide such information to the investment adviser only upon its request, but such information should be provided affirmatively.4.

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