SEC Proposes Enhanced Proxy Voting Reporting Requirements for Funds and Managers
On September 29, 2021, the SEC announced proposed amendments to Form N-PX that, if adopted, would expand the information that registered funds must disclose about their proxy votes. The SEC’s proposal would also impose Form N-PX reporting requirements on Form 13F filers—i.e., “institutional investment managers”—with respect to the managers’ proxy voting records on say-on-pay proposals for securities over which those managers exercise voting power.
Highlights from the SEC’s proposal include:
Standardized Language, Reporting Format and Website Availability of Information. In order to enhance funds’ current Form N-PX disclosures so investors can more easily understand and analyze proxy voting information, the SEC’s proposal would require funds to use standardized descriptions of voting matters, more clearly tie the description of the voting matter to the issuer’s form of proxy and categorize voting matters by type. In addition, the SEC’s proposal would require information reported on Form N-PX to be submitted in a structured data language via an XML file or SEC-provided web-based form. The SEC also proposed to require funds to provide their proxy voting records on (or through) a fund’s website.
Quantitative Disclosures, including for Securities on Loan. The SEC’s proposal would require funds to disclose the number of shares that were voted (or, if not known, that were instructed to be cast) and how those shares were voted, as well as the number of shares that were loaned and not recalled for the vote. Since funds currently are required to report information for each matter relating to a portfolio security considered at any shareholder meeting during the reporting period, and with respect to which the fund was “entitled to vote,” the SEC proposed amending Form N-PX to provide that a fund will be entitled to vote on a matter if its portfolio securities are on loan as of the record date. This aspect of the proposal is intended to provide transparency into how a fund’s securities lending activities affect its proxy voting practices.
Say-On-Pay Reporting on Form N-PX for Institutional Investment Managers. In connection with the proposed amendments to Form N-PX, the SEC’s proposed new rule 14Ad-1 would subject each person that is (i) an “institutional investment manager” as defined in the Securities Exchange Act of 1934 and (ii) required to file reports under Section 13(f) of the Exchange Act, to an annual Form N-PX reporting requirement with respect to votes on say-on-pay proposals—but only if the manager “exercised voting power” over the security. The proposed rule would establish a two-part test for determining whether a vote must be reported, requiring both power to vote a security (or to cause another party to vote such security) and the actual use of such power to influence the voting decision in the case of the specific vote. To the extent a manager did not exercise voting power over any securities that held say-on-pay votes during a given reporting period, the manager would file a Form N-PX report affirmatively stating that fact.
The SEC’s proposal is available here. The public comment period will remain open for 60 days after publication of the proposing release in the Federal Register.