SEC Commissioner Elad L. Roisman defended the agency's proposals to modernize proxy voting rules and update shareholder regulations.

As previously covered, the SEC proposed amendments designed to improve the accuracy and transparency of information provided by proxy advisory firms. The proposals (i) specify that proxy voting advice generally constitutes a solicitation, (ii) codify the Commission'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 remarks at the Catholic University Columbus School of Law, Mr. Roisman asserted that the proposals would not:

  • benefit any one type of market participant or lobbyist;

  • suppress a shareholder's right to vote, whether in a person at a company's annual meeting or via proxy;

  • make shareholder proposal submissions "prohibitively expensive" for retail investors, but instead require that investors holding $2,000 worth of shares in a company wait three years before submitting a proposal;

  • enable CEOs to more readily spend shareholder money, but instead would preserve company money (i.e., shareholder money);

  • allow CEOs to sue proxy voting advice businesses, unless a proxy voting advice business makes a "materially false or misleading" statement;

  • compromise the independence of proxy voting advice businesses' solicitations prior to publication, but instead seek to ensure that solicitations are available to all issuers in a more timely manner;

  • stifle competition in the proxy voting advice business market, but instead apply a "light-touch" approach to SEC oversight of the proxy voting advice businesses by (i) requiring proxy advice businesses to disclose conflicts of interest with enough time for companies to review and respond before publication and (ii) providing an alternative proposal for public comment that would exempt smaller proxy voting advice businesses from such requirements; and

  • "attempt[] to solve a problem that does not exist," but instead are aimed at protecting retail investors by ensuring that advisers who take on voting authority for clients do so in a manner consistent with their fiduciary obligations.

Mr. Roisman also clarified that it is a conflict of interest for proxy voting advice businesses to base their proxy voting advice on the preferences of a certain group of clients. He said that such a conflict may be a Section 13D violation and requires disclosure to all clients.