SEC Proposes Enhanced Proxy Voting Reporting Requirements for Funds and Managers

On September 29, 2021, the SEC introduced proposed amendments to Kind N-PX that, if adopted, would increase the data that registered funds should disclose about their proxy votes.  The SEC’s proposal would additionally impose Kind N-PX reporting necessities on Kind 13F filers—i.e., “institutional investment managers”—with respect to the managers’ proxy voting information on say-on-pay proposals for securities over which these managers train voting energy.

Highlights from the SEC’s proposal embrace:

  • Standardized Language, Reporting Format and Web site Availability of Data. To be able to improve funds’ present Kind N-PX disclosures so buyers can extra simply perceive and analyze proxy voting data, the SEC’s proposal would require funds to make use of standardized descriptions of voting issues, extra clearly tie the outline of the voting matter to the issuer’s type of proxy and categorize voting issues by kind. As well as, the SEC’s proposal would require data reported on Kind N-PX to be submitted in a structured information language by way of an XML file or SEC-provided web-based kind.  The SEC additionally proposed to require funds to offer their proxy voting information on (or by) a fund’s web site.

  • Quantitative Disclosures, together with for Securities on Mortgage. The SEC’s proposal would require funds to reveal the variety of shares that had been voted (or, if not identified, that had been instructed to be forged) and how these shares had been voted, in addition to the variety of shares that had been loaned and not recalled for the vote.  Since funds at present are required to report data for every matter referring to a portfolio safety thought-about at any shareholder assembly throughout the reporting interval, and with respect to which the fund was “entitled to vote,” the SEC proposed amending Kind N-PX to offer {that a} fund will likely be entitled to vote on a matter if its portfolio securities are on mortgage as of the report date. This side of the proposal is meant to offer transparency into how a fund’s securities lending actions have an effect on its proxy voting practices. 

  • Say-On-Pay Reporting on Kind N-PX for Institutional Funding Managers. In reference to the proposed amendments to Kind N-PX, the SEC’s proposed new rule 14Ad-1 would topic every particular person that’s (i) an “institutional investment manager” as outlined within the Securities Change Act of 1934 and (ii) required to file experiences below Part 13(f) of the Change Act, to an annual Kind N-PX reporting requirement with respect to votes on say-on-pay proposals—however provided that the supervisor “exercised voting power” over the safety.  The proposed rule would set up a two-part take a look at for figuring out whether or not a vote have to be reported, requiring each energy to vote a safety (or to trigger one other get together to vote such safety) and the precise use of such energy to affect the voting resolution within the case of the precise vote.  To the extent a supervisor didn’t train voting energy over any securities that held say-on-pay votes throughout a given reporting interval, the supervisor would file a Kind N-PX report affirmatively stating that truth. 

The SEC’s proposal is obtainable here. The general public remark interval will stay open for 60 days after publication of the proposing launch within the Federal Register.

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