The Securities and Exchange Commission released late Monday guidance on the responsibilities of investment advisors voting proxies on behalf of their clients, particularly in retaining proxy advisory firms.
The guidance, issued by the Division of Investment Management in frequently asked question format, is “intended to respond to criticism by issuers and others that proxy advisory firms face conflicts of interests and that investment advisors rely too heavily on such firms for voting recommendations,” according to the Investment Adviser Association.
Karen Barr, IAA’s general counsel, told ThinkAdvisor in an email message that IAA doesn’t believe the guidance presents “any dramatically new concepts for investment advisors,” and that the “core concept is that advisors have a fiduciary duty to vote proxies in the best interests of their clients.”
The guidance “appropriately confirms” that advisors may retain proxy advisory firms to assist in them in carrying out these proxy voting duties, Barr says, and “underscores the fact that the SEC is focusing on these issues, so advisors should review their procedures for conducting due diligence and exercising ongoing oversight with respect to proxy advisory firms they retain.”
Barr says IAA is also “pleased” that the guidance may result in proxy advisory firms proactively providing information about conflicts to advisors.
The SEC held a roundtable last December to discuss the use of proxy advisory firm services by institutional investors and investment advisors.
The guidance sets out examples of steps an advisor could take to demonstrate that it casts proxy votes in accordance with clients’ best interests and the advisor’s proxy voting procedures.