SEC approves proxy voting rule changes


November 19, 2021

The US Securities and Exchange Commission (SEC) has approved several amendments to proxy voting rules to address concerns about the impairment of advice quality.

The new rules follow the ‘Sunshine Act meeting’, which was held this week and saw the US regulator’s leadership vote to give shareholders the ability to vote by proxy for their preferred combination of board candidates.

The SEC has also proposed to scrap conditions to the availability of two exemptions from the proxy rules’ informational and filing requirements, on which proxy voting advice businesses often rely. Additionally, proposals have been made to rescind changes made last year to the proxy rules’ liability provision.

Investors previously expressed concerns that the 2020 changes created confusion, increased proxy voting advice businesses’ litigation risks, and potentially impaired the independence and quality of such advice.

On director nominations, the amended rules now require dissident shareholders and registrants to provide shareholders with a proxy card that includes the name of all registrant and dissident nominees.

It will also require such parties to provide each other with notice of the names of their nominees, as well as establishing a filing deadline, a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.

Gary Gensler, SEC chair, said: “These amendments address concerns that shareholders voting by proxy cannot vote for a mix of dissident and registrant nominees in an election contest, as they could if [they] voted in person.

“Today’s amendments will put these candidates on the same ballot. They will put investors voting in person and by proxy on equal footing. This is an important aspect of shareholder democracy.”

The amendments will apply to all non-expect solicitations for contested elections, other than those involving registered investment companies and business development companies.

Alongside this, the commission also voted to adopt amendments of the proxy rules to ensure that proxy cards clearly specify the applicable shareholder voting options in all director elections and to require proxy statements to disclose the effect of a shareholder’s decision to withhold a vote.

The final rules will be published in the Federal Register, and will apply to all shareholder meetings held after 31 August 2022.

Proxy voting has been a focus for the US regulator. Last week it announced a ruling to streamline ESG proxy voting, allowing investors more ability to express views on ESG issues through proxy votes.

Last Updated: 19 November 2021