The Securities and Exchange Commission’s newly issued guidance on investment advisors’ proxy voting duties is receiving mixed reviews — with the Investment Adviser Association stating Wednesday that the new plan will increase costs for advisors and “barriers to entry for proxy advisory firms.”
During a Wednesday meeting at SEC headquarters in Washington, the agency voted 3-2 to issue guidance that clarifies how an investment advisor’s fiduciary duty and Rule 206(4)-6 under the Advisers Act relate to an advisor’s proxy voting on behalf of clients, particularly if the investment advisor retains a proxy advisory firm.
Rule 206(4)-6 under the Advisers Act requires an advisor who exercises voting authority with respect to client securities to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment advisor votes proxies in the best interest of its clients.
Given that the SEC’s guidance hasn’t been published, “based on statements at the open meeting, we’re concerned that the new guidance adopted today will increase costs for advisers and also increase barriers to entry for proxy advisory firms,” Gail Bernstein, IAA’s general counsel, told ThinkAdvisor in a Wednesday email message.
Bernstein added that while the commission stated “that its actions do not create new obligations, we believe that as a practical matter they will for investment advisors.”
IAA, Bernstein said, was “disappointed that the guidance was issued without the opportunity for public comment and without the benefit of an economic analysis.”
The SEC’s guidance will become effective once published in the Federal Register.