The Securities and Exchange Commission voted Wednesday to rescind rules governing proxy voting advice put into practice in November 2020. Critics of the Trump-era regulations said they impeded the independence of firms that advise investors on how to vote in corporate elections, Reuters reported.
“I am pleased to support these amendments because they address issues concerning the timeliness and independence of proxy voting advice, which would help to protect investors and facilitate shareholder democracy,” SEC Chair Gary Gensler stated in a press release. “It is critical that investors who are the clients of these proxy advisory firms are able to receive independent and timely advice.”
The action rescinded the following conditions related to proxy voting advice: (1) registrants that are the subject of proxy voting advice have such advice made available to them in a timely manner; and (2) clients of proxy voting advice businesses are provided with a means of becoming aware of any written responses by registrants to proxy voting advice, the SEC said.
Additionally, the final amendments also delete the 2020 changes made to the proxy rules’ liability provision.
“Although the 2020 changes were intended to clarify the application of this liability provision to proxy voting advice, they instead created a risk of confusion regarding the application of this provision to proxy voting advice, undermining the goal of the 2020 changes. The final amendments address the confusion while affirming that proxy voting advice generally is subject to liability under the proxy rules,” the SEC said.
The adopting release will be published on the SEC website and in the Federal Register, and the final amendments and rescission of the guidance will become effective 60 days after publication in the Federal Register.
ESG disclosures
In other business, by November, investors likely will learn the fate of the SEC’s plan for more comprehensive corporate climate disclosure, Bloomberg reported. The SEC announced in March its intention to amend some rules and reporting forms to promote consistent, comparable and reliable information for investors concerning funds’ and advisers’ incorporation of environmental, social and governance factors.
“ESG encompasses a wide variety of investments and strategies. I think investors should be able to drill down to see what’s under the hood of these strategies. This gets to the heart of the SEC’s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs,” Gensler said at the time.
Although Democrats and environmental groups favor the proposal, according to Bloomberg, it has been rejected by ”business lobbying groups and Republicans who contend such rulemaking falls outside the SEC’s purview.”
According to the SEC, funds focused on the consideration of environmental factors generally would be required to disclose the greenhouse gas emissions associated with their portfolio investments. Funds claiming to achieve a specific ESG impact would be required to describe the specific impact(s) they seek to achieve and summarize their progress on achieving those impacts. Funds that use proxy voting or other engagement with issuers as a significant means of implementing their ESG strategy would be required to disclose information regarding their voting of proxies on particular ESG-related voting matters and information concerning their ESG engagement meetings.
