Proposed Amendments on “Proxy Advisor” Exemptions

On November 5, 2019, the SEC proposed amendments to its rules governing proxy solicitations to require proxy advisors to provide to their clients more extensive disclosure of material conflicts of interest.

First, the SEC is proposing to amend Rule 14a-1(l) to have the terms “solicit” and “solicitation” include any proxy voting advice that makes a recommendation to a shareholder regarding its vote on a matter by a person who markets its expertise as a provider of such voting advice and sells such advice for a fee.  As a result, proxy advisory recommendations may be deemed solicitations subject to the SEC’s proxy rules.

Second, the proposed amendments to Rule 14a-2(b) would require any proxy advisory firm relying on the exemptions from the information and filing requirements of the proxy rules pursuant to this Rule to comply with the following conditions:

  • Proxy advisors must disclose material conflicts of interest in their proxy voting advice;
  • Registrants must be given at least three business days to review the proxy voting advice and provide feedback, provided the registrants file their proxy statements less than 45 but at least 25 days before the date of the shareholder meetings; and
  • Registrants may request that proxy advisors include in their voting advice a hyperlink or similar medium directing the recipient of the advice to written statements that contain the registrants’ views on the advice.

The proposed amendments can be found here.

KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.

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