“The investing community desires change”. Not something we weren’t aware of, surely? However, when it’s a summary of the almost unanimous response to the most comprehensive regulatory review of the US proxy system the SEC has undertaken  in 30 years, this finding is  highly significant.

In short, the Securities Transfer Association analysis of the 199 responses received shows that practically every area the SEC asked for feedback on needs reforming.  Here’s a brief run-down of the specific findings:

• 80% of respondents want an end tothe NOBO/OBO system and more direct issuer-shareholder communications
• 100% of respondents who pay for the proxy distribution and shareholder communication services believe the market should be open to fair competition
• 88% of all respondents agreed that regulation was necessary to ensure fair and open competition in proxy distribution
• 88% agreed that the current regulated fees structure for shareholder register data needs scrapping in favour of market-driven pricing
• Only one response was opposed to establishing client-directed voting
• 92% of respondents agreed that regulation is necessary to prevent future occurences of over- or under-voting
• 61% of respondents were in support of data tagging of proxy materials, with all issuers opposed to it and nearly all investors in support

We said this summarised an almost unanimous response. But who could possibly not support lower prices, more competition, better systems, more transparent and direct shareholder communications? The mirror image of the profile of what respondents want to see changed would seem to be someone who is able to charge high fees, has little or no competition, whose systems need improving and who benefits from being able to charge multiple participants in the process for passing the same data from pillar to post.

They hardly need naming, but in the words of the STA summary “of the 199 original letters submitted, only two expressed a “very negative” opinion on proposed reforms to any of the issues: the American Business Conference, and Broadridge (which stands to gain the most by maintaining the status quo). The implication is clear: the consensus among all stakeholders – from issuers to academics – is that major reforms are badly needed”.

We seem to have found the definitive diametric opposite of the good old maxim ‘if it ain’t broke, don’t fix it’.

Comment letters on proxy reform show strong support for change: Securities Transfer Association, inc

Last Updated: 19 November 2010