The Council of Institutional Investors said in a statement it's concerned the SEC's decision could result in proxy advice distribution delays, driving up costs for investors, impairing the independence of proxy advice and causing uncertainty for institutional investors.
"The SEC has not established a compelling case to tighten regulation of proxy advisory firms, and we are concerned that it has adopted untested and unvetted requirements that could have adverse effects on investors' ability to get the timely and unbiased proxy advice they need to act as stewards of the companies they own," said Amy Borrus, Washington-based executive director at CII.
The CII, a non-partisan organization that represents asset owners with combined global assets that exceed $4 trillion, is disappointed the SEC did not first issue a revised proposal and draft guidance and seek public comment, Ms. Borrus added. "The SEC should regulate based on firm legal grounds and evidence, not pressure from business lobbyists seeking to strengthen corporate control of the proxy voting process," she said.
The CII did say it was relieved to see the pre-review portion of the proposal removed. When the SEC first unveiled the proposal in November, it called for giving companies the opportunity to make revisions to proxy advice before distribution to clients.
The business community, led by the U.S. Chamber of Commerce and the National Association of Manufacturers, has been clamoring for new regulations because they say proxy advisory firms have become too influential and don't sufficiently disclose conflicts of interest.
Jay Timmons, president and CEO of the Washington-based National Association of Manufacturers, called the new rules a "major win" and said in a statement that the SEC's actions "will reduce proxy firms' influence on important business decisions and instead empower manufacturers to prioritize investors' long-term best interests, allowing us to better lead our country's recovery and renewal at this critical time."
Thomas Quaadman, executive vice president of the Chamber's Center for Capital Markets Competitiveness in Washington, had similar thoughts. He said in a statement that the SEC acted to protect investors, promote transparency, end conflicts of interest and boost U.S. competitiveness through oversight of proxy advisory firms. These improvements will reorient shareholder proposals and director elections to ensure the long-term success of businesses and provide much-needed returns for investors."
John Zecca, Rockville, Md.-based executive vice president, global chief legal and regulatory officer at Nasdaq, also commended the SEC's actions. "It is in the best interest of investors, shareholders and the public markets to enhance the integrity of the proxy voting process by ensuring proper disclosure of potential conflicts of interest," Mr. Zecca said.