SEC Commissioner Elad L. Roisman recommended improvements to the SEC's recently proposed proxy voting rule amendments.

As previously covered, the SEC proposed rule amendments that (i) specify that proxy voting advice generally constitutes a solicitation, (ii) codify the SEC's current view that it is not solicitation when an individual provides voting advice in response to an unprompted request, (iii) enact new conditions for proxy voting advice businesses seeking to rely on exemptions from certain information and filing requirements, and (iv) provide examples of when a failure to disclose is considered "misleading," pursuant to SEA Rule 14a-9. Additionally, the SEC proposed (see previous coverage) amending the procedural requirements and resubmission thresholds of the shareholder proposal rule.

In a speech at the Council of Institutional Investors Conference, Mr. Roisman addressed comments received on the proposed pre-review period during which an issuer could submit feedback to a proxy advisor on its advice prior to the distribution of that advice to investors. Mr. Roisman acknowledged that allowing a pre-distribution review period would reduce the time period during which security holders (and their advisors) could conduct their own review of the proxy voting advice. As an alternative, Mr. Roisman advised the SEC to either:

  • implement a "contemporaneous review period" that would (i) make the report available to the issuer and security holders at the same time and (ii) notify security holders of any objections to the report raised by the issuer; or

  • introduce a "speed bump," which would require proxy voting advice businesses to disable any automatic submission features for a period of time in order to qualify for certain exemptions.

Mr. Roisman also identified several additional disclosures that he believed proxy advisors should make regarding their conflicts of interest. He urged the SEC to:

  • conduct examinations to ensure that market participants who ignore proxy voting advice and outsource their voting decisions are fulfilling their fiduciary duty to their clients;

  • make clear that shareholders operating as groups through voting advice businesses must still make disclosures required under the SEC beneficial ownership rules; and

  • address questions surrounding proxy "plumbing," such as (i) which beneficial owner is allowed to vote a certain share of stock and (ii) whether intermediaries should prove that only one vote per share is counted, and that it reflects the customer's best interest.


There are a number of areas where there appear to be sharp philosophical divides among the SEC Commissioners: environmental, social and governance ("ESG") disclosure and the regulation of proxy advisors being two of them. Seee.g.SEC Commissioner Allison Lee Advocates for Better Climate Risk Disclosure. There may not be a middle ground on some of these issues.