The SEC's division of corporation finance will not recommend enforcement actions related to a series of amendments to the proxy-voting advice rule that were finalized last year after Chairman Gary Gensler announced Tuesday that he asked the staff to consider recommending further regulatory action on the issue.
In July, the SEC, in a 3-1 vote with Republicans in control, approved sweeping changes to rules governing proxy advisory firms. The rule amendments made clear that proxy voting advice generally constitutes a solicitation; required proxy advisory firms to disclose conflicts of interests to clients; allowed companies that are the subject of voting advice to be able to access that advice prior to or at the same time as the advice is disseminated to clients; and obliged proxy advisory firms to provide clients with access to any response the company provides on voting advice before those clients vote.
Also, the rule-making codified that the failure to disclose material information regarding proxy-voting advice, like methodology, sources of information, or conflicts of interest could be deemed misleading.
Mr. Gensler has now directed staff to weigh recommending further action. "The staff should consider whether to recommend that the commission revisit its 2020 codification of the definition of solicitation as encompassing proxy voting advice, the 2019 interpretation and guidance regarding that definition, and the conditions on exemptions from the information and filing requirements in the 2020 rule amendments, among other matters," he said in a statement.
In August 2019, the SEC issued an interpretation that proxy-voting advice provided by proxy advisory firms generally constitutes a "solicitation" under the federal proxy rules and provided related guidance about the application of the proxy anti-fraud rule to proxy-voting advice.
Shortly after Mr. Gensler's statement, the division of corporation finance issued its own, noting it will not recommend enforcement action to the commission based on the 2019 interpretation and guidance or the 2020 rule amendments while the commission is considering further regulatory action in this area.
The rule amendments became effective in November 2020, but proxy-voting advice businesses subject to them were not obliged to comply with the corresponding requirements until Dec. 1, 2021.
