SEC Proposes Amendments to Proxy Rules Governing Proxy Voting Advice

The SEC proposed amendments to its rules governing proxy voting advice that would rescind two rules applicable to proxy voting advice businesses that the Commission adopted in 2020. Specifically, the Commission is proposing to rescind conditions to the availability of two exemptions from the proxy rules’ informational and filing requirements on which proxy voting advice businesses often rely. Those conditions require that: (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. Investors and others have expressed concerns that these conditions will impose increased compliance costs on proxy voting advice businesses and impair the independence and timeliness of their proxy voting advice, the SEC said in its release. The proposed amendments also would rescind the 2020 changes made to the proxy rules’ liability provision. Although the changes were intended to make clear that proxy voting advice is subject to liability under the proxy rules, investors and others have expressed concerns that the 2020 changes have created confusion, increased proxy voting advice businesses’ litigation risks, and potentially impair the independence and quality of the proxy voting advice. The proposal will have a 30-day public comment period following its publication in the Federal Register. The SEC also adopted final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting. The rule changes will give shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person, the SEC said.