December 6, 2021

Volume XI, Number 340

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December 03, 2021

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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.

© 2021 Vedder PriceNational Law Review, Volume XI, Number 288
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About this Author

John Marten Investment Attorney Vedder Price Law FIrm
Shareholder

John S. Marten, a Shareholder in the Chicago office of Vedder Price, has substantial experience representing clients in the investment management industry.

As a member of the firm’s Investment Services group, Mr. Marten counsels clients on a wide variety of matters involving the application of the federal securities laws to investment companies, investment advisers and broker-dealers. He has significant experience counseling investment company clients with respect to new products and was recently involved in the creation of two mutual funds...

(312) 609 7753
Jacob Tiedt,Vedder Price law firm investment services attorney
Shareholder

Jacob C. Tiedt is a Shareholder at Vedder Price and a member of the Investment Services group.

Mr. Tiedt’s practice includes the representation of registered mutual funds, closed-end funds and exchange-traded funds; private funds; investment advisers; and other financial institutions on a broad range of regulatory, governance and compliance matters. Mr. Tiedt regularly counsels clients on matters relating to SEC registration, disclosure and compliance; shareholder solicitation; NYSE, Nasdaq and FINRA regulation; corporate governance; and board administration. Mr....

312-609-7697
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
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