The SEC is considering updating rules on the use of proxy advisory firms and thresholds for shareholder proposals, according to a semiannual regulatory agenda published Wednesday.
No further details were provided in the agenda, which projected an April 2020 release date for advanced notice of proposed rule-making on the two subjects, the first step in issuing new rules.
SEC Chairman Jay Clayton has publicly supported revisiting rules on the proxy process and proxy advisory firms and updating the ownership thresholds for shareholder proposals. More transparency about how proxy advisory firms formulate reports and disclose conflicts of interests has been pushed by Congress and business interest groups.
The current shareholder proposal rule, allowing shareholders with a minimum of $2,000 of company stock or 1% of eligible voting shares for at least one year to submit proposals, is supported by the Council of Institutional Investors, said Amy Borrus, deputy director, in an email. "For decades, shareholder proposals have been a key tool for retail and institutional investors to communicate with other shareholders and company directors and executives on important issues affecting public companies. Many companies have voluntarily adopted corporate governance best practices contained in CII's policies in response to shareholder proposals. There is little evidence that the current volume of shareholder proposal — which constitute around 2% of the voting items at company annual meetings — puts a significant burden on companies," Ms. Borrus said.
The SEC semiannual agenda covers 40 regulatory items, including finalizing the proposed regulation best interest rule by September, and new Volcker rule requirements for banking entities engaging in proprietary trading or controlling hedge funds or private equity funds by December.
