At the ICI Conference, Dalia Blass, Director of the Securities and Exchange Commission’s Division of Investment Management, provided some insights on upcoming rulemaking initiatives. Director Blass noted that we should anticipate a proposal soon for business development company and closed-end fund offering reform, as well as recommendations for a proposal on modernizing the advertising and solicitation rules for investment advisers and a proposal for use of derivatives by investment companies. She also noted that the Chief Counsel’s Office has been working on improvements to the Division’s exemptive application review process.

Director Blass noted a number of areas in which investment advisers may perform company-specific analysis on matters put to a shareholder vote and to that end the Division will explore ways to update its guidance in order to clarify how investment advisers should fulfill their fiduciary duty in this regard. To that end, Director Blass noted that the Staff will consider, among other things, the following questions:

  • how to promote voting practices that are in the best interests of advisory clients, including voting on an issuer-specific basis when appropriate;
  • whether advisers are expected to vote every proxy;
  • how advisers should evaluate recommendations of proxy advisers, particularly where the issuer disagrees with the factual assumptions of the recommendation; and
  • how advisers should address conflicts of interest that a proxy adviser may have.

At the same conference, Commissioner Roisman addressed proxy voting. The Commissioner noted practices in the asset management sector with respect to proxy voting that have raised questions, such as why some advisers aim to vote every proxy for every company in every fund’s portfolio; centralize proxy voting functions within a complex and vote uniformly across funds in the complex; rely on third-party proxy advisory firms to assist with devising and implementing voting policies. The Commissioner noted that a fund adviser is acting in a fiduciary capacity when it is voting proxies. Commissioner Roisman posed a number of questions regarding whether certain approaches employed by asset managers with respect to proxy voting are consistent with the exercise of their fiduciary duty. The Commissioner also raised concerns regarding the reliance by asset managers on proxy advisory firm recommendations, the processes used by proxy advisory firms in formulating their voting recommendations, and the conflicts of interest that may affect proxy advisory firms. Commissioner Roisman noted that it would be a good time for the Commission to consider whether guidance to asset managers would be helpful in their interactions with proxy advisory firms.